A Robust Simulation for EOQ Model with Exponential Distributed Demand

Abstract

With the rapid development of economic and technology, the demand of market changes in a fluctuating way. Many researches use statistical methods to describe the demand rate while in economic order quantity (EOQ) optimization. Exponential distribution has been widely recognized as an effective model for describing the demand rate especially for new items and deteriorating items. However, in most simulation optimization for EOQ, the distribution of the demand rate is set as normal distributed. Based on the assumption that the demand rate follows exponential distribution, we conduct robust simulation for EOQ model by incorporating Kriging model and Taguchi's robust view and then estimate the pareto frontier. The result suggests the robust optimization requires different order quantity from that of classic EOQ.