Inventory Policy for Retail Stores: A Multi-Item EOQ Model Considering Permissible Delay in Payment and Limited Warehouse Capacity

Abstract

The retail industry such as minimarkets has many products consisting of several types of products that have expiration dates. Their warehouses have limited capacity, making it difficult to make decision about optimum inventory. Most of the suppliers will give permissible delay in payment, that can be used to increase income potential through earned by considering the risk of fines imposed if payments are exceeded and help companies raise capital before generating sales. These three factors must be considered when developing the inventory model. The purpose of this study is to develop a multi-item inventory model by considering perishable or damaged products, permissible delay in payment in limited warehouse. Model development is carried out in 2 stages. The first stage was the development of a multi-item EOQ model by considering product defects and permissible delay in payment. The second stage model is by adding a capacity constraint factor to the model.  The results obtained are getting the optimal order quantity by considering the number of product types, product damage factors, late payments in limited warehouses, the best ordering policy can be found, and it is known that the total inventory costs to changes in parameters are good and sensitive to changes in percentage, interest percentage, payment allowances, and warehouse capacity through sensitivity tests.