Regression analysis as an alternative method of determining the Economic Order Quantity and Reorder Point

Abstract

The goal of the paper is to show how the problem of determining the Economic Order Quantity and Reorder Point could be solved with the use of a regression model. The method proposed by the authors of the paper is an alternative to the methods in which a mathematical EOQ formula is used and also to the simulation method. The intention of the authors was to find a solution which would allow, on the one hand, to obtain results as close as possible to real parameters and on the other, could be useful for decision makers in companies. With the use of a specially elaborated model, simulations have been conducted for different parameters (value, weight, demand of a commodity, logistics costs) which first proved the importance of the optimization of deliveries to a warehouse. Second, based on the results of these simulation, model regression models have been worked out and used for finding delivery quantities and reorder point. Both regression models are statistically significant, a slightly better value is obtained by the model created for the reorder point.

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