A MODIFIED ECONOMIC PRODUCTION QUANTITY (EPQ) WITH SYNCHRONIZING DISCRETE AND CONTINUOUS DEMAND UNDER FINITE HORIZON PERIOD AND LIMITED CAPACITY OF STORAGE

Jonrinaldi, Jonrinaldi and Henmaidi, Henmaidi and Oktavia, Nurike A MODIFIED ECONOMIC PRODUCTION QUANTITY (EPQ) WITH SYNCHRONIZING DISCRETE AND CONTINUOUS DEMAND UNDER FINITE HORIZON PERIOD AND LIMITED CAPACITY OF STORAGE. In: 9th International Seminar on Industrial Engineering and Management, 20-22 September 2016, Padang, Indonesia.

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Abstract

The most popular inventory model to determine production lot size is the Economic Production Quantity (EPQ) model. It aids enterprises on how to minimize the total of production costs by reducing the inventory cost. However, the three main parameters in EPQ model, demand, set up cost, and holding cost, are not sufficient enough to solve current inventory issues. When an enterprise has two types of demand, continuous and discrete demands, the basic EPQ model would be no longer useful. Continuous demand comes from customers who want their demand to be fulfilled every time per unit time, while the fulfilment of discrete demand is at a fixed interval of time. Literature review is conducted to observe other formulations of EPQ model. As literature dealing with this problem cannot be found, this study aims to develop an EPQ model considering the two types of demand simultaneously. Therefore, this research proposes a modified EPQ model considering both continuous and discrete demands under finite horizon period. To find the solution of the model, three solution approaches were developed: (1) procedure approach, (2) algorithm approach, and (3) simultaneous approach. A numerical example is used to demonstrate the model. The solutions of the numerical example obtained using the three solution approaches are discussed

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