Multi-item Economic Order Quantity with Consideration of Transportation Costs and Vehicle Capacity

Abstract

In this paper, a supplier-retailer logisticsystem for multi-item is investigated as a two-echelon environment. There is asingle location in each echelon; the unique supplier at the first echelon has to replenish the retailer's warehouse at the second echelon. A model minimizing the total cost of purchasing, ordering, inventory, variable and fixed transportation costs is developed. Multistage shipment with a specific number of vehicles is allowed in the model. An iterative solution algorithm for the model is proposed. Also, the model is extended to the case of variable vehicle capacity. Computational results verify the proposed model as well as the efficiency of the algorithm.