We know that, theoretically, ordering the EOQ drives lower costs. However, what

Question

We know that, theoretically, ordering the EOQ drives lower costs. However, what happens when we introduce modifications to the assumptions of the EOQ model? Think about the following situations and select all the statements that are true.

Select all correct answers
A one-time-buy discount will always increase the order size.
A decrease of the holding cost will increase the order size.
If there is any lead time, the pipeline inventory will be a function of the order size.
When a supplier offers an all-units discount, his buyers’ cycle stock tends to raise because they increase the size of each order.
If planned backorders are allowed, the order size will increase.
None of the above

Explanation / Answer

a. A one-time-buy discount will always increase the order size, you try to benefit from economies of scale.

b. A decrease of the holding cost will increase the order size. Here you try to save on ordering cost and time.

c. When a supplier offers an all-units discount, his buyers’ cycle stock tends to raise because they increase the size of each order. Here you try to get maximum discount.

d. If planned backorders are allowed, the order size will increase. Here customer satisfaction rather than cost becomes priority

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