# Ppt on economic order quantity eoq

##### OPSM 501: Operations Management Week 5: Batching EOQ Koç University Graduate School of Business MBA Program Zeynep Aksin

. Batch Size Q Total annual costs H Q/2: Annual holding cost S R /Q:Annual setup cost EOQ EOQ Model: if there is a lead time L ROP = Reorder point L = Lead time (constant) Q = Economic order quantity L L ROP Time # Units on hand Q EOQ Economic Order Quantity (EOQ) Model  Economic Order Quantity (EOQ) Model –Robust, widely used –Insensitive to errors in estimating parameters (40-20-2 Rule): 40% error in/

##### Economic Order Quantity EOQ Model EOQ Model Equations (part - 1) Equations (part - 1) Equations (part – 2) Equations (part – 2)

Economic Order Quantity EOQ Model EOQ Model Equations (part - 1) Equations (part - 1) Equations (part – 2) Equations (part – 2) EOQ Model  Total Inventory cost is the minimum.  Annual demand of the item is constant and known.  Annual demand of the item is uniformly distributed through out the year.  Lead time is zero.  Total OC (P) = Total CC (R) Equations For EOQ, Total OC (P) = Total CC (R) Total/

##### ACC423: Management Accounting II Module4 (Week10) Covering: 1.Regression Analysis 2.EOQ Analysis 3.Linear Programming By:E. P. Enyi, Ph.D, MBA, ACA, FAAFM,

constant; 5.That replenishment is made instantaneously, i.e. batch is delivered whole Economic Order Quantity (EOQ) GRAPHICAL APPROACH To calculate EOQ graphically, the following ingredients are necessary: -Total costs per annum (i.e. ordering cost plus carrying costs) -Number of orders required per annum (i.e. Annual DD / Order Qty) -Average stock (i.e. Order Qty / 2) Example: A company uses 50000 bottles per annum which costs N10/

##### Inventory Control Models.

DC IP Per Unit Carrying Cost: 2DC * Q = C h Percentage Carrying Cost: IP DC 2 Inputs and Outputs of the EOQ Model Models Input Values Output Values Annual Demand (D) Ordering Cost (Co) Carrying Cost (Ch) Lead Time (L) Demand Per Day (d) Economic Order Quantity (EOQ) Reorder Point (ROP) The Reorder Point (ROP) Curve ROP = (Demand per day) x (Lead time for a new/

##### Cost Management System Costs Associated with Goods for Sale 1. Purchasing costs include transportation costs. 2. Ordering costs include receiving and.

is two weeks. What is the economic-order-quantity? Cost Management System Relevant ordering cost per purchase order: \$209 Relevant carrying costs per package per year: Required annual ROI (15% × \$15)\$2.25 Relevant other costs 3.25 Total\$5.50 Cost Management System = 988 packages EOQ = Cost Management System What are the relevant total costs (RTC)? RTC = Annual relevant ordering costs + Annual relevant carrying costs RTC/

##### Inventory Models  3 Models with Deterministic Demand Model 1: Regular EOQ Model Model 2: EOQ with Backorder Model 3: EPQ with Production  2 Models with.

demand.  As an example of deterministic models, we will demonstrate in detail Model 1, the basic EOQ model, In this model the firm orders the product. The goal of the firm is to determine Q, the Economic Order Quantity that minimizes the firm’s total cost.  Determining the economic order quantity uniquely determines the cycle’s length T.  The determination depends on the relative cost of making an/

##### Chapter 6. Economic Order Quantity (EOQ) provides _____ number of units to order. a.Minimum b.Maximum c.Optimum d.None of the above.

Chapter 6 Economic Order Quantity (EOQ) provides _____ number of units to order. a.Minimum b.Maximum c.Optimum d.None of the above Economic Order Quantity (EOQ) provides _____ number of units to order. a.Minimum b.Maximum c.Optimum d.None of the above Cost associated with ordering and receiving goods: a.Procurement cost b.Inventory cost c.Holding cost d.None of the above Cost associated with ordering and receiving/

##### Chapter 11. Order Point Inventory Control Methods

and supply Economic Order Quantity (EOQ) A: annual demand Q: order quantity CP: ordering (preparation) cost per order CH: carrying cost per unit per year Annual inventory carrying cost= (Q/2)·CH Annual ordering cost= (A/Q) ·CP Total annual cost (TAC) = (A/Q)·CP + (Q/2)·CH Finding the optimal order quantity that minimizes TAC using Calculus Observation (Fig 11.4) Economic time between order (TBO) in weeks = EOQ/(A/52) EOQ Sensitivity What/

##### AMSAA 1 / 13 ECONOMIC REPAIR QUANTITY Similar to the Concept of an Economic Order Quantity:  Due to the costs incurred each time we induct, it may be.

Economic ORDER QuantityEconomic REPAIR Quantity Quantity economical to Procure at the Reorder Point Used to provide an economical tradeoff between Holding Cost and Admin Procurement Cost  Larger EOQ= Increased Holding Cost  Smaller EOQ= Increased Admin Cost Quantity economical to Repair at the RAP Used to provide an economical/ ACTION POINT AMSAA 8 / 13 PROCUREMENT DECISIONS: REPAIR DECISIONS: Assets Time Economic Order Quantity FebMarJan BUY Reorder Point = SL + Net Leadtime Demand Applicable Assets Time /

##### Chapter 9 Inventory management 库存管理. AIMS OF THE CHAPTER UNDERSTAND why organizations hold stocks ANALYSE the costs of holding stock CALCULATE economic.

costs gives a total cost curve that is an asymmetric ‘U’ shape with a distinct minimum ● this minimum cost shows the optimal order size – which is the economic order quantity, EOQ. 9.2 ECONOMIC ORDER QUANTITY The standard analysis of EOQ: The cost changes with different order quantity Worked example John Pritchard buys stationery for Penwynn Motors. The demand for printed forms is constant at 20 boxes a month. Each box/

##### Order Policy Codes for use in MRP and AVP Jim Simunek Senior Consultant CISTECH Inc. www.cistech.net.

buy in multiples of 12. Policy Code D-Fixed Order Quantity Based on EOQ (Economic order quantity) calculation. Maintained in Fixed Order Quantity Field Similar to Minimum Order Quantity Use when: –Demand is fairly steady –Cost is insignificant –Packaging or handling constraints might determine order size –An EOQ type of order quantity is required Order Policy D - FOQ 400 Order Policy D Fixed Order Quantity - Multiple 12 - FOQ 400 Order Policy Code F-Part Period Balancing Std. Cost MRP/

##### Economic Order Quantity The economic order quantity (EOQ) is the fixed order quantity (Q) that minimizes the total annual costs of placing orders and holding.

/p During production, d units are sold or used each day. (p – d) units go into inventory. Maximum inventory: Total cost: Economic production quantity (EPQ): EOQ vs. EPQ When to use economic order quantity (EOQ): Demand is independent Compute how much to order (order quantity) When to use economic production quantity (EPQ): Parts or products will be produced: demand is dependent Compute how much to make at one time (production lot size)

##### 1 The Economic Production Quantity (EPQ) Model. 2  Similar assumptions to the EOQ model, except that production/delivery is not instantaneous  Units.

= hQ max /2= hQ (1- D / P )/2  Total ordering/setup cost = AD / Q  Total production/purchasing cost = cD  Total cost = AD / Q + hQ (1 - D/P )/2 + cD  Unit cost = A / Q + hQ (1 - D / P )/2 D + c Costs 7 The Economic Production Quantity 8 The EPQ is equivalent to an EOQ model with holding cost h’=h(1-D/P). Consequently/

##### Channel Coordination and Quantity Discounts Z. Kevin Weng Presented by Jing Zhou.

fees The Role of Quantity Discounts in Channel Coordination Economic literature Marketing literature Production management literature Quantity Discounts Price discrimination Effect on the profit Demand decreases in price Operating cost is fixed Effect on the operating costs Demand is fixed Operating cost is a function of order quantities Quantity discounts are effective and necessary mechanisms to achieve channel coordination Assumptions  The buyer uses EOQ model as her/

##### Inventory Management Chapter 17. Topics Basic concepts. Management issues. Inventory-related costs. Economic order quantity model. Quantity discount model.

Basic concepts. Management issues. Inventory-related costs. Economic order quantity model. Quantity discount model. Order timing decisions. Order quantity and reorder point interactions. Multi-item management. Multiple/Economic Order Quantity Model (EOQ) TAC=(A/Q)C P + (Q/2)C H = annual ordering cost + annual carrying cost. Quantity Discount Model TAC=(v)A + (A/Q)C P + (Q/2)C H =annual purchase cost + annual ordering cost + annual carrying cost Calculating the minimum-cost order quantity: 1. Calculate EOQ/

##### Inventory Control IME 451, Lecture 3.

Sensitivity of EOQ Models Holding and setup costs are fairly insensitive to lot size Errors caused by restricting lot sizes to powers of 2 are minimal (no more than 6%) Powers of 2 ordering can facilitate sharing truck resources (one week, two weeks, four weeks…) Extensions involve non-instantaneous production (economic production lot model), backorders, major and minor setups, and quantity discounts Dynamic Lot/

##### Inventory control models EOQ Model. Learning objective After this class the students should be able to: calculate the order quantity that minimize the.

cost per unit: The setup cost per unit: The production cost per unit: Economic order quantity Exercise Each is invited to analyze the following insights, based on the EOQ model (20 minutes): 1. “There is a tradeoff between lot size and inventory/ obtained by using the economic order quantity is \$952.50, so increasing the order quantity by 10% leads a total cost increase of only \$4.30. Changing the order quantity by a small amount has very little effect on the cost, because EOQ formula gives robust solutions./

##### INTRODUCTION TO LOGISTICS AND SUPPLY CHAIN MANAGEMENT Prof. Jarosław Witkowski, Phd Chair of Strategic Management and Logistics Wroclaw University of Economics.

, computer systems, supply chain and network) Strategic approach Outsourcing Globalization and virtualization Customer orientation City logistics and non- conventional applications EOQ simple formula (Harris, Wilson) Economic order quantity formula helps to find the optimal number of units which should be ordered or made in order to minimize the total inventory costs Developed in 1913 by Harris and applied in industry by Wilson Many disadvantages and several/

##### Material Lectur-9 Main Ahmed Farhan (ACA). Inventory Control System 1. Order level. 2. Maximum stock level. 3. Minimum stock level. 4. Danger level.

*Lead time) 10,000 – (900 * 8) = 2800 units Danger Level Average daily consumption x Emergency time 900 x 2 = 1800 units Economic Order Quantity (E.O.Q) Economic Order Quantity is the quantity which an entitle orders to the suppliers. This order Quantity should be Economical. Methods for EOQ calculation Economic Order Quantity Formula Table Graph E.O.Q 2x RU x O.C U.C x C.C% RU Annual Required units O.C/

##### Managing Facilitating Goods

costs Shortage costs Inventory Management Questions What should be the order quantity (Q)? When should an order be placed, called a reorder point (ROP)? How much safety stock (SS) should be maintained? Inventory Models Economic Order Quantity (EOQ) Special Inventory Models With Quantity Discounts Planned Shortages Demand Uncertainty - Safety Stocks Inventory Control Systems Continuous-Review (Q,r) Periodic-Review (order-up-to) Single Period Inventory Model Inventory Levels For/

##### EOQ Answers the Question “How Much to Order?” Assumptions: zInstantaneous production zImmediate delivery zDeterministic demand zConstant demand: D units/year.

: every D/Q times per year Average Variable Cost/Year: TVC = h*Q/2 +A*D/Q The EOQ zUse Calculus to find the value of Q that minimizes TVC(Q) zOr... The Economic Order Quantity h Q/2 = A D/Q Q 2 = 2 A D/h Q = SQRT(2 A D/h) CAVEAT: Make sure you use commensurate units! An Example zRaw/

##### OMSAN LOJİSTİK Economic Order Quantity ‘EOQ’ Inventory Planning and Management Latin America Logistics Center Logistics Management Series -

OMSAN LOJİSTİK Economic Order QuantityEOQ’ Inventory Planning and Management Latin America Logistics Center Logistics Management Series - Economic Order Quantity 1.Constant Demand Rate 2.No Constraints on Lot Size 3.Only relevant costs are holding and ordering/setup 4.Decisions for items are independent from other items 5.No uncertainty in lead time or supply. Assumptions Economic Order Quantity On-Hand Inventory (Units) Time Average Inventory Q—2Q—2/

##### NATIONAL AND KAPODISTRIAN UNIVERSITY OF ATHENS Faculty of Economics Department of Business Economics and Finance Center of Financial Studies Laboratory.

for proper management decisions.  Under certain conditions, both coincide while under other conditions they differ. 7 The economic cost as an opportunity cost Example: Suppose that company A undertakes the production of aluminum frames and has for/ minimum (given the total cost and the order quantity). The intersection of the carrying costs with the ordering costs curve is represented by the following formula. EOQ=[(2ad/K)] 1/2, which a= variable cost per order (or production setup) d= Demand (periodical/

##### Inventory Stock of items held to meet future demand

number of final units that will be produced (usually well known) Material Requirement Planning Independent Demand for items is determined by external customers (usually forecasted) Economic Order Quantity (EOQ) models Push/Pull View of Supply Chains Procurement, Customer Order Manufacturing and Cycle Replenishment cycles PUSH PROCESSES PULL PROCESSES In this view processes are divided based on their timing relative to the timing of a customer/

##### SCMN/ Relationships February 28, 2008. 1). The inventory required to meet demand under conditions of certainty, is called _________. a. EOQ b. average.

productivity and long-term contracts d. concentrate on core competencies 3). Simple EOQ is: a. efficient order quantity b. a balancing of inventory carrying cost and transportation cost c. a balancing of set-up cost and inventory carrying cost d. economic inventory level under conditions of uncertainty 3). Simple EOQ is: a. efficient order quantity b. a balancing of inventory carrying cost and transportation cost c. a/

##### CHAPTER 6 PRODUCT QUANTITY DECISIONS AND STOCK MANAGEMENT.

be varied between products, according to lead times PERIODIC REVIEW Insert Figure 6.1 ECONOMIC ORDER QUANTITY (EOQ) Order quantities can be:  large, placed infrequently  small, placed frequently EOQ determines the most cost effective quantity to order, based on costs of ordering and possession Useful in conjunction with periodic review type system PRINCIPLES OF EOQ Costs of acquiring a product:  ordering administration  supplier search and selection  expediting  inspection  increase with frequency of/

##### Module 5 - Inventory Management 2 Describe the functions and costs of an inventory system. Determine the order quantity. Calculate the reorder point.

OF INVENTORIES 11 E O Q 12 Optimal Inventory Level  The optimal quantity that should be ordered  It is the quantity that will minimize the total inventory costs. Economic Order Quantity (EOQ) 13 Single product line Demand rate: recurring, known, constant Lead time: constant, known No quantity discounts - stable unit cost No stock-outs allowed Items ordered/produced in a lot or batch Batch received all at once Holding/

##### Transportation/Logistic Strategy Introduction to Inventory Total Cost Analysis Computation of Safety Stocks Setting Order Points Joint Replenishment Number.

-50 % Elements of Inventory Carrying Costs Transportation/Logistic Strategy Order Quantity Cost of Ordering Cost of Carrying Inventory Total Cost \$ (With Constant Ordering Costs) Zero Inventory JIT Economic Order Quantity Transportation/Logistic Strategy Total Cost = OC + CC OC = Order Placement Cost = A(R/Q) CC = Inventory Carrying Cost = 1/2(QVW) Where: Q = Optimal Order Quantity (EOQ) A = Cost of placing an order R = Annual Rate of use V = Value per unit/

##### Copyright 2013 John Wiley & Sons, Inc. Chapter 7: Supplement B The Economic Order Quantity.

Copyright 2013 John Wiley & Sons, Inc. Chapter 7: Supplement B The Economic Order Quantity 7B-2 The Economic Order Quantity Model (EOQ) EOQ model applier to items that are: –Replenished in batches or orders –Not produced and delivered instantaneously Only two costs are considered: 1.Carrying costs 2.Ordering costs Will decide 1.When to order 2.How many to order 7B-3 Assumptions 1.Constant rate of demand 2.Shortages not allowed/

##### Calculate Economic Order Quantity © Dale R. Geiger 20111.

awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors. Standard: With at least 80% accuracy: 1.Describe the concept of economic order quantity 2.Identify the key variables in the EOQ calculation © Dale R. Geiger 20113 Batch Quantity Concepts © Dale R. Geiger 20114 Batch Cost Assumptions Annual demand for units produced in batches is known Every batch is the same size i/

##### Lecture 6 Inventory Management Chapter 11.

Lecture 6 Inventory Management Chapter 11 Economic Production Quantity (EPQ) Economic production quantity (EPQ) model: variant of basic EOQ model Production done in batches or lots Replenishment order not received in one lump sum unlike basic EOQ model Inventory is replenished gradually as the order is produced hence requires the production rate to be greater than the demand rate This models variable costs are annual holding cost, and annual/

C c I max Total Cost ( ) = Cost Related to No. Orders ( ) Cost Related to Inventory Size ( ) + Spreadsheet Models for Managers: Session 11 11/12 Copyright © 1994-2011 Richard Brenner Economic order quantity EOQ: Lowest-cost order quantity for constant demand It can be shown mathematically that EOQ is the value of Q for which Ordering Costs = Carrying Costs. Readings: Economic Order Quantity 2DC 0 √ CcCc Spreadsheet Models for Managers: Session 11 11/

##### Economic Order quantity opgave 21-15 Tijn van der Zant.

Economic Order quantity opgave 21-15 Tijn van der Zant How to calculate EOQ EOQ = √(2DP/C) Where: –D = Demand in units for a period –P = Relevant ordering costs per purchase order –C = Relevant carrying costs of 1 unit in stock for the same period used/costs (TRC) Total annual relevant cost (TRC) = DP/Q+QC/2 Where Q = quantity and in this example I assume it’s the same as EOQ (though that’s not necessary Calculate total ordering and carrying costs using EOQ DP/Q+QC/2 = 12000*120/1200+1200*2/2 = 12000 * 1/10 /

##### Inventory Management FactoryWholesalerDistributorRetailerCustomer Replenishment order Replenishment order Replenishment order Customer order Production.

costs Shortage costs Inventory Management Questions What should be the order quantity (Q)? When should an order be placed, called a reorder point (ROP)? How much safety stock (SS) should be maintained? Inventory Models Economic Order Quantity (EOQ) Special Inventory Models With Quantity Discounts Planned Shortages Demand Uncertainty - Safety Stocks Inventory Control Systems Continuous-Review (Q,r) Periodic-Review (order-up-to) Single Period Inventory Model Inventory Levels For/

##### 2015/6/281 管理會計 (95/11/05) (4) Management Accounting (Fall, NCKU) Relevant Total Costs = Purchasing Costs + Ordering Costs +Carrying Costs + Shortage Costs.

000 台（每週 250 台，一年 52 週） ＝ Carrying Cost ＝每台每年＄ 5.2 (Q/2)*\$5.2 ＝ Ordering Cost 每訂購一次成本＄ 200 D/Q*\$200 EOQ ＝ ＝ 1,000 台 Deliveries ＝ 13,000 台 /1,000 台 ＝ 13 次 Order Point ＝ Lead Time ( 250 台 × 2 週 ) ＝ 500 台 + Shortage Costs+ Quality CostsQuality Costs Purchasing Cost Payoff T. EOQ 2015/6/2816 經濟訂購量 (EOQ) : 採購存貨會發生訂購成本 (Ordering Cost) ，進貨之後會 發生持有成本 (Carrying Cost) ，考慮公司銷量、前置時 間後所計算出來可讓兩種成本之和最低之每次訂購量 每次訂購量 成本 訂購成本 持有成本 EOQ Economic Order Quantity 0 總成本 Back 2015/6/2817 Shortage Cost vs. Safety Stock 一週二週三週四週五週 250/

##### Inventory Inventory is the stock of goods, commodities or other economic resources that are stored for the smooth and efficient running of a business.

the actual arrival of goods Reorder level This is the time when we should place an order by taking into consideration the interval between placing the order and receiving the supply. Economic Order Quantity(EOQ) EOQ is that size of order which minimizes total annual cost of carrying inventory and the cost of ordering under the assumed conditions of certainty and that annual demands are known Inventory models Deterministic/

##### Costs involved in Inventory Models Ordering (Setup) cost Unit purchasing (Production) cost Holding (Carrying) cost Shortage (Penalty) cost Revenue (Selling.

) cost Unit purchasing (Production) cost Holding (Carrying) cost Shortage (Penalty) cost Revenue (Selling price) Basic EOQ Model EOQ: Economic Order Quantity Assumptions of EOQ models: –Demand is constant (unvarying ), expressed as annual demand (units per year ). –Models use continuous review, not periodic review. –Lead time is constant & known. –Quantity discounts are not possible. –2 variable costs: setup cost and holding cost. Inventory Levels Inventory vs. time. Inventory/

#####  1. PURCHASE COST.  2. CAPITAL COST.  3. ORDERING COST.  4. INVENTORY CARRING COST.  5. SHORTAGE COST.

per unit is Rs. 2 & it costs Rs. 36 to place an order and to process the delivery. The inventory carrying cost is estimated at 9% of average inventory investment. Determine  (i) Economic order quantity.  (ii) Optimum no. of orders placed per annum.  (iii) Minimum total cost of inventory per annum. Sol : (i) EOQ ( Q*)= √ 2DCo / C p. I = √ 2. 10,000. 36 / 2. 0.09/

##### T HE MOT AND V ENTURE B USINESS Prof. Takao Ito, Doctor of Economics, PH.D. of Engineering, Graduate School of Engineering, Hiroshima University Thursday,

T HE MOT AND V ENTURE B USINESS Prof. Takao Ito, Doctor of Economics, PH.D. of Engineering, Graduate School of Engineering, Hiroshima University Thursday, October 16, 2014 T /EOQ) C h is the holding cost per unit. It is also called carrying costs. Q is the order quantity Order cost (Co) is derived from the number of orders placed (D/Q - demand p.a. divided by order quantity) multiplied by the cost of placing an order. Co……ordering cost D…… demand per year Q …… order quantity Total cost=Holding cost + Order/

##### Inventory Management IV: Inventory Management Systems This module discusses periodic vs. perpetual systems, inventory position, quantity to order, time.

Numbers Definition Time Between Orders (P)= Q / D Where :P = Time (in same period considered for demand) Q = Order Quantity (often, Economic Order Quantity) D = Demand (Annual, Monthly, Weekly, Daily) e.g. If D is daily demand, time between orders would be in days./ done on an annual or quarterly basis. The second approach (Perpetual System) uses an order quantity (such as EOQ) and annual demand to determine the time between orders. C ALCULATIONS IN A P ERIOD S YSTEM 9 Calculations in a Periodic System MBTN/

##### UML Ops Analysis 63.210 Don Sutton. Functions of Inventory Decoupling Storing resources Irregular supply and demand Quantity discounts Avoiding stock.

Cost of Stock outs Cost Trade off Ordering vs Holding Economic Order Quantity Assumptions Constant demand Lead time in known Instantaneous receipt of inventory Constant purchase cost No stock out Holding cost and ordering cost are constant EOQ Equation Reorder Point ROP = d x LT Ordering Cost = Holding Cost Holding Cost = (Q/2)C h Ordering Cost = (D/Q) C o Quantity Discounts Holding cost is dependent upon purchase/

##### Calculate Economic Order Quantity © 20111. What do you think? Corporal O’Reilly, the supply clerk, knows that it costs the Army money to generate a purchase.

handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors Standard: With at least 80% accuracy: Describe the concept of economic order quantity Identify the key variables in the EOQ calculation © 20113 Batch Quantity Concepts © 20114 Batch Cost Assumptions Annual demand for units produced in batches is known Every batch is the same size i.e. same/

##### ECONOMIC ORDER QUANTITY Unni Krishnan Pillai - 16.

ECONOMIC ORDER QUANTITY Unni Krishnan Pillai - 16 Meaning:  Economic order quantity is the level of inventory that minimizes the total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model or Wilson Formula. Overview  EOQ only applies where the demand for a product is constant over the year and that each/

##### KATYUSHA COMPUTATIONS OR QANATATIVE MANAGEMENT: USING ECONOMIC ORDER QUANTITY TO ASSESS SUSTAINABILITY OF HOSTILE ROCKET OFFENSIVES Johnnie B. Linn III,

and the frequency and size of additions to that stock, how many rockets ought Hezbollah fire off each day? The Standard EOQ Cost Function The Economic Order Quantity (EOQ) Modifications to Cost Function Demand (D) adjusted for casualty rate z of rockets at launch. Order Cost (c) adjusted for proportion n of shipments intercepted. Holding Cost (h) adjusted for daily casualty rate s of rockets in/

##### CHAPTER 1 GOALS AND FUNCTIONS. Background of Finance Economics Macro Micro Risk Finance Stock Price Stock Price Accounting Financial Managerial.

, and taxes. Shortage cost Potential disruption in Lost sales, lost production schedules goodwill Overstock cost Adverse changes in prices, obsolescence, pilferage Economic Order Quantity: (1) Direct relationship between carrying cost and order size. (2) Inverse relationship between ordering cost and order size. (3) Economic order quantity (EOQ) is the order size, which will minimize the total inventory cost and is determined at the point where the carrying cost curve and the/

##### Managing Inventory Why do we have inventory? Inventory Decisions (When & How Much) Economic Order Quantity Safety Stocks & Service Levels The Newsboy Problem.

in inventory, warehousing costs, shrinkage, deterioration, obsolescence, etc. backorder cost - cost of alienating customers THREE BASIC DECISIONS When to review? When to order? How much to order? Continuous Reorder point Fixed EOQ (Economic order quantity) Continuous review (Q,R) Periodic At review time Variable Order-up-to Periodic review (T, TI) 4 Policy Simple Continuous Review Continuous Review (Q,R) Policy in a deterministic system with no/

##### ISQA 479 MRP Quality Control. Materials Requirements Planning Bill of Material List of all parts necessary to make ONE BofM X Order = GROSS Req’mts Subtract.

Sizing Techniques  Lot-for Lot  EOQ/EPQ  Periodic Order Quantity  Fixed Interval, Variable QuantityEOQ/Avg Use  Fixed Order Quantity  Variable Interval, Fixed Quantity Standard Package Quantities Price Break Levels EOQ Quality  How would you define ‘/Manufacture  Fluid Decision  Revisit at Regular Intervals  As Economic Conditions Change  As Internal Conditions Change  Always Maintain Internal Capability Reasons to Make  Quantities Too Small  Quality Too Critical  Timing Too Critical  /

##### Measuring Logistics’ Performance June 20, 2014. Logistics Lead Time (LLT) … is the delay (aka latency) between the initiation of an order and the completion.

the cut-out fabrics Buttons, which will be sewed on the blouses. Procurement Logistics Example Contd – Determine Economic Order Quantity (EOQ) (Carrying) Costs of -Transport -Storage -Cost of tied capital Total Costs Purchasing Price Costs Quantity Economic Order Quantity Example (Contd…): Optimal Order Quantity for the Fabrics ParametersPart Order (In Rs.’0000s)Total Order (In Rs.’0000s) Purchase Price 2.502.40 Transport Costs 0.250.20 Storage Costs 0.100.25/

##### EOQ History –Interest on capital tied up in wages, material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured.

EOQ History –Interest on capital tied up in wages, material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time; “set-up” costs on the job fix the minimum. Experience has shown one manager a way to determine the economical/’t want to tie up too much precious capital in inventory. Question: how many racks should MedEquip order at once? EOQ Modeling Assumptions 1. Production is instantaneous – there is no capacity constraint and the entire lot is produced/

##### 1 INVENTORY MODELS Outline Deterministic models –The Economic Order Quantity (EOQ) model –Sensitivity analysis –A price-break Model Probabilistic Inventory.

1 INVENTORY MODELS Outline Deterministic models –The Economic Order Quantity (EOQ) model –Sensitivity analysis –A price-break Model Probabilistic Inventory models –Single-period inventory models –A fixed order quantity model –A fixed time period model 2 / Trade-off Given costs of overestimating/underestimating demand and the probabilities of various demand sizes how many units will be ordered? 7 Consider an order quantity Q Let P = probability of selling all the Q units = probability (demand  Q) Then, (1-/