Joint Economic Ordering Policies of Multiple Wholesalers and a Single Manufacturer with Price-dependent Demand Functions

Abstract

The economic ordering policies for multiple regional wholesalers and the production lot-sizing policy for a single manufacturer have been studied in a joint analysis under the assumption that the yearly demands of each region are functions of their respective retail proces. We obtained optimum EOQs for both linear and constant price elasticity demand functions. Although normally the wholesalers would order in quantities equal to their EOQs, they are encouraged to purchase in different quantities by the producer providing compensation to offset the wholesalers' increased costs. The production lot-size is determined to minimize the overall production cost.

Keywords:

• demand function
• EOQ
• price elasticity
• inventory
• production lot-size