Model Analysis of The Problem of Price Discounts in Inventory Control
ABSTRACT
Suppliers provide price discounts in order to increase cash flow and market share or to reduce product inventory. Coming up with this situation, retailers have to decide how to adjust order quantity to achieving their maximum benefits . Increasing order quantity with price discounts can reduce the purchase price and order fees on one hand , but on the other hand , more orders will increase retailers inventory investment and other inventory-related costs. On top of this, Seeking a variety of cost saving is the sum of the biggest problems faced by retailers.
In the inventory control model, some of the basic formula to determine the order quantities are the assumption that the price of goods is to remain unchanged.With quantity discounts, the traditional EOQ equation is not adequate. When quantity discounts are offered, the objective function is still to find the way to make the total cost minimum. Therefore, this article first introduces the general EOQ model, and on this basis, combined with the actual economic relations prevailing in the phenomenon of volume discounts, to establish a "volume discount under the conditions of the economic order quantity model."
KEYWORDS: stock control，price discounts，model analysis，retail
