Using the Deterministic EOQ Formula in Stochastic Inventory Control

Sven Axsäter
Sven Axsäter
Department of Industrial Engineering, Lund University, P.O. Box 118, S-221 00 Lund, Sweden
Search for more papers by this author

Department of Industrial Engineering, Lund University, P.O. Box 118, S-221 00 Lund, Sweden

Published Online:1 Jun 1996https://doi.org/10.1287/mnsc.42.6.830

Abstract

This note gives an improved bound (√5 − 2)/2 ≈ 0.1180 for the relative cost increase when using the deterministic EOQ formula as a heuristic solution when demands are stochastic. We also discuss under what circumstances this bound is tight.

Cited by
- Less is more: optimizing flexible demand fulfillment under delayed payments with capital constraints
  2 May 2026 | Operational Research, Vol. 26, No. 3
- Simple Economic Order Quantity heuristics for stochastic inventory control
  11 September 2025 | IMA Journal of Management Mathematics, Vol. 36, No. 4
- A divergent two-echelon spare part inventory system with lost sales and compound Poisson demand
  International Journal of Production Economics, Vol. 285
- Cost of Carrying Inventory and Environmental Sustainability of Air Cargo
  30 March 2025
- Designing a new sustainable healthcare network considering the COVID-19 pandemic: Artificial intelligence-based solutions
  Expert Systems with Applications, Vol. 260
- Operational Research: methods and applications
  27 December 2023 | Journal of the Operational Research Society, Vol. 75, No. 3
- A periodic review inventory model facing different disruption profiles
  International Journal of Production Economics, Vol. 265
- A hybrid differential evolution algorithm for a location-inventory problem in a closed-loop supply chain with product recovery
  26 December 2022 | Complex & Intelligent Systems, Vol. 9, No. 4
- RaktFlow - Blood Bank Management and Donation System
- Controlling inventories in omni/multi-channel distribution systems with variable customer order-sizes
  Omega, Vol. 114
- Investigation of the Effect of e-Platform Information Security Breaches: A Small and Medium Enterprise Supply Chain Perspective
  IEEE Transactions on Engineering Management, Vol. 69, No. 6
- Impacts of carbon trading mechanism on closed-loop supply chain: A case study of stringer pallet remanufacturing
  Socio-Economic Planning Sciences, Vol. 81
- Inventory Policies Under Service Level Target: Comparison in Terms of Relevant Costs and Bullwhip Effect
  23 February 2022
- Optimization of the product service supply chain under the influence of presale services
  Journal of Industrial and Management Optimization, Vol. 18, No. 5
- Coordination between forward and reverse production streams for maximum profitability
  Omega, Vol. 104
- Two-echelon supply chain network design with trade credit
  Computers & Operations Research, Vol. 131
- Shipment sizing for autonomous trucks of road freight
  12 November 2020 | The International Journal of Logistics Management, Vol. 32, No. 2
- Supply chain redesign implications to information disruption impact
  International Journal of Production Economics, Vol. 232
- Supply chain network design with coordinated inventory control
  Transportation Research Part E: Logistics and Transportation Review, Vol. 145
- References
  28 June 2019
- Strategic Information Sharing in a Dynamic Supply Chain with a Carrier under Complex Uncertainty
  Discrete Dynamics in Nature and Society, Vol. 2019
- EOQ with independent endogenous supply disruptions
  Omega, Vol. 83
- Neuro-fuzzy inference systems approach to decision support system for economic order quantity
  8 June 2019 | Economic Research-Ekonomska Istraživanja, Vol. 32, No. 1
- Dual-index Policies for Serial Systems with Dual Delivery Modes and Batch Orders
  SSRN Electronic Journal, Vol. 56
- Research on "Location-Inventory" Problem of Spare Parts Supply Chain Based on Product Service System
  Procedia CIRP, Vol. 83
- Sustainable multi-echelon inventory control with shipment consolidation and volume dependent freight costs
  European Journal of Operational Research, Vol. 267, No. 3
- An integrated location-inventory problem in a closed-loop supply chain with third-party logistics
  19 June 2017 | International Journal of Production Research, Vol. 56, No. 10
- Optimal Lot-Sizing Algorithms on Stochastic Demand at the Retailer
  11 July 2018
- The discrete-time EOQ model: Solution and implications
  European Journal of Operational Research, Vol. 266, No. 1
- An Improved Differential Evolution Algorithm for a Multicommodity Location‐Inventory Problem with False Failure Returns
  24 October 2018 | Complexity, Vol. 2018, No. 1
- Closed-Form Approximations for Optimal (r, q) and (S, T) Policies in a Parallel Processing Environment
  Marcus Ang,
  Karl Sigman,
  Jing-Sheng Song,
  Hanqin Zhang
  19 July 2017 | Operations Research, Vol. 65, No. 5
- A two-stage stochastic programming model for periodic replenishment control system under demand uncertainty
  Computers & Industrial Engineering, Vol. 107
- EOQ holds under stochastic demand, a technical note
  Applied Mathematical Modelling, Vol. 45
- Incorporating location and inventory decisions into a supply chain design problem with uncertain demands and lead times
  Journal of Manufacturing Systems, Vol. 43
- Spare Parts Inventory Management Using Quantitative and Qualitative Classification
  19 December 2016
- Heuristics for multi-item two-echelon spare parts inventory control subject to aggregate and individual service measures
  European Journal of Operational Research, Vol. 256, No. 1
- A Note on Economic Order Quantity Model
  iBusiness, Vol. 09, No. 04
- Chapter 4 Order QuantitiesWhen Demand Is Approximately Level
  19 December 2016
- Chapter 6 Individual Items with Probabilistic Demand
  19 December 2016
- Chapter 8 Managing Slow-Moving and Low-Value (Class C) Inventories
  19 December 2016
- Continuous-Review (R, nQ) Policies for Inventory Systems with Dual Delivery Modes
  Sean X. Zhou,
  Chaolin Yang
  24 October 2016 | Operations Research, Vol. 64, No. 6
- Integrated Modeling for Location Analysis
  18 October 2016 | Foundations and Trends in Technology, Information and Operations Management, Vol. 9, No. 1-2
- Exact Analysis of Divergent Inventory Systems with Time-Based Shipment Consolidation and Compound Poisson Demand
  Olof Stenius,
  Ayşe Gönül Karaarslan,
  Johan Marklund,
  A. G. de Kok
  5 July 2016 | Operations Research, Vol. 64, No. 4
- An empirical examination of the assumptions of the Square Root Law for inventory centralisation and decentralisation
  7 August 2015 | International Journal of Production Research, Vol. 54, No. 8
- Dynamic and stochastic behavior of coefficient of demand uncertainty incorporated with EOQ variables: An application in finished-goods inventory from General Motors׳ dealerships
  International Journal of Production Economics, Vol. 172
- Management of Blood Donation System: Literature Review and Research Perspectives
  2 September 2016
- Joint location-inventory problem with differentiated service levels using critical level policy
  Transportation Research Part E: Logistics and Transportation Review, Vol. 83
- Optimal design of multi-echelon supply chain networks under normally distributed demand
  16 July 2013 | Annals of Operations Research, Vol. 227, No. 1
- RFID Technology in Business and Valuation Methods
- Point‐of‐Use Hybrid Inventory Policy for Hospitals
  28 October 2014 | Decision Sciences, Vol. 45, No. 5
- A century of evolution from Harris׳s basic lot size model: Survey and research agenda
  International Journal of Production Economics, Vol. 155
- Multi-echelon inventory control: an adjusted normal demand model for implementation in practice
  17 January 2014 | International Journal of Production Research, Vol. 52, No. 11
- The Utility of EOQ in Supply Chain Design and Operation
  17 August 2013
- Closed-Form Approximations for Optimal (r,q) and (S,T) Policies in a Parallel Processing Environment
  SSRN Electronic Journal, Vol. 229
- Incorporating location, routing and inventory decisions in dual sales channel — A hybrid genetic approach
- Optimal batch ordering policies for assembly systems with guaranteed service
  International Journal of Production Research, Vol. 51, No. 20
- Optimizing Retail Assortments
  Robert P. Rooderkerk,
  Harald J. van Heerde,
  Tammo H. A. Bijmolt
  9 October 2013 | Marketing Science, Vol. 32, No. 5
- Monotonicity properties of a class of stochastic inventory systems
  7 April 2012 | Annals of Operations Research, Vol. 208, No. 1
- On properties of discrete (r, q) and (s, T) inventory systems
  European Journal of Operational Research, Vol. 229, No. 1
- An inventory-transportation system with stochastic demand
  23 October 2012 | Computational Management Science, Vol. 10, No. 1
- Justifying RFID Investment to Enable Mobile Service Applications in Manufacturing and Supply Chain
- Justifying RFID Investment to Enable Mobile Service Applications in Manufacturing and Supply Chain
- Measuring the Value of RFID Investment: Focusing on RFID Budget Allocation
  IEEE Transactions on Engineering Management, Vol. 59, No. 4
- Using the economical order quantity formula for inventory control in one‐warehouse multiretailer systems
  4 April 2012 | Naval Research Logistics (NRL), Vol. 59, No. 3-4
- Quantitative Comparison between Two Different Distribution Centers' Dynamic Location Decision Methods
  26 April 2012
- A multi-product capacitated inventory-location model with risk pooling
- A simulation-optimization approach for integrated sourcing and inventory decisions
  Computers & Operations Research, Vol. 37, No. 9
- A three-level supply chain network design model with risk-pooling and lead times
  Transportation Research Part E: Logistics and Transportation Review, Vol. 46, No. 5
- A Power-of-Two Ordering Policy for One-Warehouse Multiretailer Systems with Stochastic Demand
  Leon Yang Chu,
  Zuo-Jun Max Shen,
  12 August 2009 | Operations Research, Vol. 58, No. 2
- A note on evaluating the risk in continuous review inventory systems
  23 July 2009 | International Journal of Production Research, Vol. 47, No. 19
- Location-Inventory Problem
  27 April 2009
- Heuristics for Base-Stock Levels in Multi-Echelon Distribution Networks
  SSRN Electronic Journal, Vol. 38
- A multi-item lot sizing model for a practical capacitated two-stage production system
  IFAC Proceedings Volumes, Vol. 42, No. 4
- Joint determination of order quantity and reorder point of continuous review model under quantity and freight rate discounts
  Computers & Operations Research, Vol. 35, No. 12
- Mixed-Integer Nonlinear Programming Models and Algorithms for Large-Scale Supply Chain Design with Stochastic Inventory Management
  25 September 2008 | Industrial & Engineering Chemistry Research, Vol. 47, No. 20
- Optimal supply planning in MRP environments for assembly systems with random component procurement times
  17 September 2008 | International Journal of Production Research, Vol. 46, No. 19
- Integrating the Number and Location of Retail Outlets on a Line with Replenishment Decisions
  Hussein Naseraldin,
  Yale T. Herer,
  22 May 2008 | Management Science, Vol. 54, No. 9
- Capacitated warehouse location model with risk pooling
  28 March 2008 | Naval Research Logistics (NRL), Vol. 55, No. 4
- Inventory-location models for remote and direct retailing with time-sensitive demand
- Implementation of the Newsvendor Model with Clearance Pricing: How to (and How Not to) Estimate a Salvage Value
  Gérard P. Cachon,
  A. Gürhan Kök,
  1 July 2007 | Manufacturing & Service Operations Management, Vol. 9, No. 3
- The value of information sharing in the presence of supply uncertainty and demand volatility
  International Journal of Production Research, Vol. 45, No. 6
- Leadtime reduction in a inventory system: An agency perspective
  International Journal of Production Economics, Vol. 105, No. 1
- A simple procedure for determining order quantities under a fill rate constraint and normally distributed lead-time demand
  European Journal of Operational Research, Vol. 174, No. 1
- Single-Echelon Systems: Deterministic Lot Sizing
- A multi-commodity supply chain design problem
  23 February 2007 | IIE Transactions, Vol. 37, No. 8
- The ( s , Q ) inventory model with Erlang lead time and deterministic demand
  2 July 2004 | Naval Research Logistics (NRL), Vol. 51, No. 6
- A Joint Location-Inventory Model
  Zuo-Jun Max Shen,
  Collette Coullard,
  Mark S. Daskin,
  1 February 2003 | Transportation Science, Vol. 37, No. 1
- Supply Chain Operations: Serial and Distribution Inventory Systems
- Managing waiting times of backordered demands in single‐stage ( Q , r ) inventory systems
  14 August 2002 | Naval Research Logistics (NRL), Vol. 49, No. 6
- Web‐based simulation portal for investigating impacts of sharing production information on supply chain dynamics from the perspective of inventory allocation
  Integrated Manufacturing Systems, Vol. 13, No. 5
- A supply chain model of vendor managed inventory
  Transportation Research Part E: Logistics and Transportation Review, Vol. 38, No. 2
- Managing multi‐item common vendor inventory system with random demands
  International Journal of Physical Distribution & Logistics Management, Vol. 32, No. 3
- An Inventory-Location Model: Formulation, Solution Algorithm and Computational Results
  Annals of Operations Research, Vol. 110, No. 1-4
- Coordinated replenishments with alternative supply sources in two-level supply chains
  International Journal of Production Economics, Vol. 73, No. 3
- Optimal and Near-Optimal ( s,S ) Inventory Policies for Levy Demand Processes
  15 August 2002 | RAIRO - Operations Research, Vol. 35, No. 1
- A DYNAMIC UNIT COST BASED ECONOMIC PRODUCTION QUANTITY MODEL WITH FUZZY JIT CONCEPT
  Journal of the Chinese Institute of Industrial Engineers, Vol. 18, No. 6
- Distribution free bounds for service constrained (Q, r) inventory systems
  1 January 2000 | Naval Research Logistics, Vol. 47, No. 8
- Decentralized inventory control in a two-level distribution system
  European Journal of Operational Research, Vol. 127, No. 3
- Single-Echelon Systems with Independent Items
- DECENTRALIZED MULTIECHELON INVENTORY CONTROL
  1 December 1998 | Production and Operations Management, Vol. 7, No. 4

Volume 42, Issue 6

June 1996

Pages 783-938

Article Information

Metrics

Information

Published Online:June 01, 1996

Cite as

Sven Axsäter, (1996) Using the Deterministic EOQ Formula in Stochastic Inventory Control. Management Science 42(6):830-834.

https://doi.org/10.1287/mnsc.42.6.830

Keywords

PDF download

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Using the Deterministic EOQ Formula in Stochastic Inventory Control

Abstract

Volume 42, Issue 6

Article Information

Metrics

Information

Cite as

Keywords

Sign Up for INFORMS Publications Updates and News