An EOQ Approach to Purchase-Dependent DemandsWhen Unmet Orders Are Canceled

We investigate the inventory models for purchase-dependent demands in the case in which customer orders are canceled if all items in the order are not delivered all at once. The exact objective function of an inventory model is quite difficult to derive when purchase dependence exists. Determining the optimal order quantity and reorder point is also a challenging task. Thus, we first analyze the properties of optimal solutions using an EOQ model to derive the condition of optimal solution. Then, we extend the condition to continuous review models. Through computer simulations, we demonstrate the usefulness of this study’s approach. In general, the inventory model, which considers the purchase dependence, reduces the loss of sales by holding more inventories through more frequent orders, thus eventually minimizing the total cost.