Model and algorithm of an inventory problem with the consideration of transportation cost

In this paper, we address the problem of deciding the optimal ordering quantity and frequency for a supplier–retailer logistic system in which the transportation cost as well as the multiple uses of the vehicles are considered. Based on the traditional economic order quantity (EOQ) formula, a modified EOQ model is set up and an algorithm for the model is presented. Computational results verify the proposed model as well as the efficiency of the algorithm.