BUSN9058: Warehousing and global transportation Dr.

Sadeque Hamdan

EOQ with incremental discount

𝑄 𝐾𝜆
𝜑 (𝑄 ) = ℎ + + 𝑏𝜆
2 𝑄
Using ℎ = 𝐼𝑏
𝑄 𝐾𝜆
𝜑(𝑄) = 𝐼𝑏 + + 𝑏𝜆
2 𝑄
Let 𝑏 = 𝑎1 + 𝑎2 /𝑄
𝑄 𝐾𝜆
𝜑(𝑄) = 𝐼(𝑎1 + 𝑎2 /𝑄) + + (𝑎1 + 𝑎2 /𝑄)𝜆
2 𝑄
Simplify:
𝐼𝑎1 𝐼𝑎2
𝜑 (𝑄 ) = 𝑄+ + 𝐾𝜆𝑄 −1 + 𝑎1 𝜆 + 𝑎2 𝜆𝑄−1
2 2
Collect similar terms:
𝐼𝑎1 𝐼𝑎2
𝜑 (𝑄 ) = 𝑄+( + 𝑎1 𝜆) + (𝐾𝜆 + 𝑎2 𝜆)𝑄−1
2 2
Take the first derivative
𝐼𝑎1
𝜑 ( 𝑄 )′ = − (𝐾𝜆 + 𝑎2 𝜆)𝑄−2
2
Set the first derivative to be equal to zero and solve for 𝑄
𝐼𝑎1
− (𝐾𝜆 + 𝑎2 𝜆)𝑄−2 = 0
2
𝐼𝑎1
= (𝐾𝜆 + 𝑎2 𝜆)𝑄 −2
2
𝐼𝑎1 (𝐾𝜆 + 𝑎2 𝜆)
=
2 𝑄2
(𝐾𝜆 + 𝑎2 𝜆)
𝑄2 =
𝐼𝑎1
2

(𝐾𝜆 + 𝑎2 𝜆)
𝑄=√
𝐼𝑎1
2

s.hamdan@kent.ac.uk Spring term 2022