An EOQ model for multiple products with varying degrees of substitutability
In this paper, the authors present an EOQ model with substitutions between products and a dynamic inventory replenishment policy. Their key assumption is that many products in the market are substitutable at different levels, and that, in most cases, a customer who discovers that a desired product i...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
De Gruyter
2019-12-01
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| Series: | Economics: Journal Articles |
| Subjects: | |
| Online Access: | https://doi.org/10.5018/economics-ejournal.ja.2019-30 |
| _version_ | 1811319327627935744 |
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| author | Eksler Leonid Aviram Roei Elalouf Amir Kamble Aakash |
| author_facet | Eksler Leonid Aviram Roei Elalouf Amir Kamble Aakash |
| author_sort | Eksler Leonid |
| collection | DOAJ |
| description | In this paper, the authors present an EOQ model with substitutions between products and a dynamic inventory replenishment policy. Their key assumption is that many products in the market are substitutable at different levels, and that, in most cases, a customer who discovers that a desired product is unavailable will choose to consume a product with similar attributes or functionality, rather than not purchase at all. Therefore, given a firm that stocks multiple substitutable products, the authors assume that a stock out of one product has a direct impact on other products’ demand. The main purpose of our model is to enable inventory managers to develop ordering policies that ensures that, in the event that a specific product runs out and cannot be replenished due to unforeseen circumstances, the consequent increase in demand for related products will not cause further stock out incidents. To this end, the authors introduce a dependency factor, a variable that indicates the level of dependency, or correlation, between one product and another. The dependencies among the various products offered by the firm are embedded into the EOQ formula and assumptions, enabling managers to update their ordering schedules as needed. This approach has the potential to generate more practical and realistic purchasing and inventory optimization policies. |
| first_indexed | 2024-04-13T12:40:38Z |
| format | Article |
| id | doaj.art-14f866747e8846148883fcdccec8c70a |
| institution | Directory Open Access Journal |
| issn | 1864-6042 |
| language | English |
| last_indexed | 2024-04-13T12:40:38Z |
| publishDate | 2019-12-01 |
| publisher | De Gruyter |
| record_format | Article |
| series | Economics: Journal Articles |
| spelling | doaj.art-14f866747e8846148883fcdccec8c70a2022-12-22T02:46:31ZengDe GruyterEconomics: Journal Articles1864-60422019-12-0113110.5018/economics-ejournal.ja.2019-30An EOQ model for multiple products with varying degrees of substitutabilityEksler Leonid0Aviram Roei1Elalouf Amir2Kamble Aakash3Bar Ilan University, Department of Management, Ramat Gan, IsraelBar Ilan University, Department of Management, Ramat Gan, IsraelBar Ilan University, Department of Management, Ramat Gan, IsraelSavitribai Phule Pune University, Department of Management Science, Pune, IndiaIn this paper, the authors present an EOQ model with substitutions between products and a dynamic inventory replenishment policy. Their key assumption is that many products in the market are substitutable at different levels, and that, in most cases, a customer who discovers that a desired product is unavailable will choose to consume a product with similar attributes or functionality, rather than not purchase at all. Therefore, given a firm that stocks multiple substitutable products, the authors assume that a stock out of one product has a direct impact on other products’ demand. The main purpose of our model is to enable inventory managers to develop ordering policies that ensures that, in the event that a specific product runs out and cannot be replenished due to unforeseen circumstances, the consequent increase in demand for related products will not cause further stock out incidents. To this end, the authors introduce a dependency factor, a variable that indicates the level of dependency, or correlation, between one product and another. The dependencies among the various products offered by the firm are embedded into the EOQ formula and assumptions, enabling managers to update their ordering schedules as needed. This approach has the potential to generate more practical and realistic purchasing and inventory optimization policies.https://doi.org/10.5018/economics-ejournal.ja.2019-30economic order quantity (eoq)optimizationsubstitute productsdependency factorreorder pointc44c51c61l60 |
| spellingShingle | Eksler Leonid Aviram Roei Elalouf Amir Kamble Aakash An EOQ model for multiple products with varying degrees of substitutability Economics: Journal Articles economic order quantity (eoq) optimization substitute products dependency factor reorder point c44 c51 c61 l60 |
| title | An EOQ model for multiple products with varying degrees of substitutability |
| title_full | An EOQ model for multiple products with varying degrees of substitutability |
| title_fullStr | An EOQ model for multiple products with varying degrees of substitutability |
| title_full_unstemmed | An EOQ model for multiple products with varying degrees of substitutability |
| title_short | An EOQ model for multiple products with varying degrees of substitutability |
| title_sort | eoq model for multiple products with varying degrees of substitutability |
| topic | economic order quantity (eoq) optimization substitute products dependency factor reorder point c44 c51 c61 l60 |
| url | https://doi.org/10.5018/economics-ejournal.ja.2019-30 |
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