A fuzzy mathematical model for the joint economic lot size problem with multiple price breaks

• Published in: European journal of operational research Vol. 95; no. 3; pp. 611 - 622
• Main Authors: Monica Lam, S., Wong, Danny S.
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 20.12.1996; Elsevier; Elsevier Sequoia S.A
• Series: European Journal of Operational Research
• Subjects: Algorithms; Fuzzy logic; Fuzzy set; Inventory; Inventory management; Mathematical programming; Operations research; Order quantity; Quantity discounts; Studies; Fuzzy set; Quantity discounts; Inventory
• ISSN: 0377-2217; 1872-6860
• DOI: 10.1016/0377-2217(95)00310-X

This paper applies fuzzy mathematical programming to solve the joint economic lot size problem with multiple price breaks. In order to entice the buyer to increase the order quantity, it is a common practice for the seller to offer quantity discounts to the buyer. From the system viewpoint, the joint cost for the seller and buyer can be minimized only when the buyer increases his economic order quantity. The problem is how to determine the number of price breaks, as well as the quantity discount and order quantity at each price break, to achieve the optimal joint cost. Fuzzy mathematical programming provides a very efficient algorithm to solve the above problem simultaneously from the perspectives of the seller and the buyer. Another common problem in joint economic lot size model is how to split the system profit between the seller and the buyer. Whereas the traditional approach to this problem is to divide the profit based on a certain ratio determined by the bargaining power of both parties, fuzzy mathematical programming can achieve the same satisfaction level to both parties based on their respective cost functions.