An economic order quantity model with multiple partial prepayments and partial backordering

The classic Economic Order Quantity model assumes that an order is paid for at the time of its receipt. In practice, suppliers may require purchasers to pay a fraction of the order’s cost in advance and sometimes allow them to divide the prepayment into multiple equal-sized parts to be paid during a fixed lead time. In this paper, an EOQ model with multiple prepayments under three different conditions: (a) no shortage, (b) full backordering and (c) partial backordering, are developed. Numerical examples illustrate the proposed models and solution method.