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Determination of economic order quantities (EOQ) in an integrated material flow system

The material flow system is the backbone of a manufacturing system as it provides both physical and operational structure. Each component (material handling, until load size, storage space, layout, etc) is a difficult problem to address on its own; however, it is imperative that components be addressed concurrently due to their interactions. This paper explores the relationships between the components in the material flow system with respect to determining the economic order quantity. This is in contrast to the traditional EOQ model, which considers only order cost, inventory cost, and demand, ignoring other material flow system issues. A multi-item economic order quantity (EOQ) model under a storage space limit is considered with respect to material handling equipment selection and requirements, unit load size, and flow path selection. The integrated material flow system problem is mathematically formulated as a large scale, nonlinear integer programming model and a heuristic solution procedure is developed. The impact of using an integrated approach to determine the EOQ is illustrated and solutions are compared to a lower bound. It is found that an integrated approach provides consistent and significant improvement in the overall solution quality.