A Study into the Effect of Varying Purchase Pricing on Cost-Emission Trade-Offs in Environmentally Sustainable EOQ Model Scenarios (Research Paper Sample)

A Study into the Effect of Varying Purchase Pricing on Cost-Emission Trade-Offs in
Environmentally Sustainable EOQ Model Scenarios
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A Study into the Effect of Varying Purchase Pricing on Cost-Emission Trade-Offs in
Environmentally Sustainable EOQ Model Scenarios
Abstract
Over time, firms around various industrial sectors have designed methodologies, policies, and plans to support supply chain sustainability since about 60 to 70% of the value of an item is associated with suppliers (Das, 2012). Presently, sustainability inputs within standard EOQ models target reductions in wastage for physical processes and offer plausible alternatives to the emission problem. Product purchase pricing is a frontier in generating pricing strategies that promote process operations and improve the triple bottom line situation. In practice, the effect that purchase pricing has on lot sizing and on inventory control is less emphatic compared to the directly accountable effect of prices on EOQ sustainability in typical business environments (Arslan & Turkay, 2013). This paper assesses the effect of purchase price variability on sustainable EOQ models using a practical case scenario. Essentially, dynamic pricing requires identifying how demand reacts to any changes in purchase price. The rational customer remains aware of apparent price distributions but has no knowledge about realizations of pricing prior to incurring a specific fixed cost (Rao, 2009). This study associates variable pricing to a more economical order quantity in consideration of costs and emissions. A higher setup cost resorts to a relatively higher difference in the order quantity for similar emission considerations. Price variability is also observed to create a significant difference in economic order quantities in the comparative case.
Introduction
The outcome associated with the use of economic order quantity models as a platform for determining accurate lot quantities at the least cost is in most cases biased (produces inaccurate EOQs because it does not put factors such as emission costs into consideration – perhaps a better word would be skewed).