Economic Inventory/Transport Lot,Sizing with Quantity and Freight Rate Discounts

Discounts are a primary marketing mechanism for inducing customers to increase the size of their purchases. Quantity discounts from suppliers and freight discounts from shippers are commonly encountered by organizations. This paper structures quantity and freight discounts into the order size decision in a deterministic economic order quantity system. Optimum lot-sizing algorithms are derived for the dual discount situations of all-units or incremental quantity discounts and all-weight or incremental freight discounts.