Incorporating coordination costs into purchasing lot size decisions

Kai Häkkinen, Outi Kettunen

Research output: Contribution to journalArticleScientificpeer-review

2 Citations (Scopus)

Abstract

This paper proposes an addition to the EOQ model in order to take the coordination costs between the supplier and the customer into account. The coordination costs are part of the transaction costs (TC) and vary significantly from one relationship to another. We have incorporated a 'TC factor' into the EOQ formula to take the coordination costs into account when calculating the purchase order size. We have also conducted a pilot study in one industrial company to test the new updated formula with real data. A key issue from a customer point of view is to determine the TC factor uniquely for each supplier.
Original languageEnglish
Pages (from-to)476-493
JournalInternational Journal of Procurement Management
Volume8
Issue number4
DOIs
Publication statusPublished - 2015
MoE publication typeA1 Journal article-refereed

Fingerprint

Transaction costs
Lot size
Purchasing
Coordination costs
Factors
Suppliers
Purchase
Order size
EOQ model

Keywords

  • economic order quantity
  • EOQ
  • transaction costs
  • purchasing management
  • Wilson formula
  • coordination costs
  • procurement
  • lot size decisions
  • purchase order size
  • buyer-supplier relationship

Cite this

Häkkinen, Kai ; Kettunen, Outi. / Incorporating coordination costs into purchasing lot size decisions. In: International Journal of Procurement Management. 2015 ; Vol. 8, No. 4. pp. 476-493.
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Incorporating coordination costs into purchasing lot size decisions. / Häkkinen, Kai; Kettunen, Outi.

In: International Journal of Procurement Management, Vol. 8, No. 4, 2015, p. 476-493.

Research output: Contribution to journalArticleScientificpeer-review

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