Special Inventory Models

Slides:

Advertisements

Similar presentations

Special Inventory Models

Advertisements

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Lean Systems.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Decision.

Special Inventory Models

To Accompany Ritzman & Krajewski Foundations of Operations Management, © 2003 Prentice Hall, Inc. All rights reserved. Chapter 15 Resource Planning.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition © 2002 Prentice Hall, Inc. All rights reserved. Chapter 8.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Simulation.

D – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Special Inventory Models D For Operations Management, 9e by Krajewski/Ritzman/Malhotra.

To Accompany Ritzman & Krajewski Foundations of Operations Management, © 2003 Prentice Hall, Inc. All rights reserved. Supplement A Decision Making.

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 6-1 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Chapter 6 Inventory.

IES 303 Chapter 15: Inventory Management Supplement E

Operations Management

Operations Management

Operations Management

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Information.

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Chapter 10 Inventory Management To.

Assignment Ch12(b) A small manufacturing firm uses approximately 3400 pounds of chemical dye per year. Currently the firm purchases 300 pounds per order.

Inventory Models. Inventory models Help to decide Help to decide How much to order How much to order When to order When to order Basic EOQ model Basic.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Linear Programming.

Supplement E - Special Inventory Models. Special Inventory Models Production quantity Demand during production interval Maximum inventory Production and.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Waiting.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition © 2002 Prentice Hall, Inc. All rights reserved. Supplement.

© 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Chapter 12 Inventory Management.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Location.

Operations Management

Assignment 4: Part (A) Problem 1: A toy manufacturer uses approximately silicon chips annually. The Chips are used at a steady rate during the 240.

___________________________________________________________________________ Quantitative Methods of Management  Jan Fábry Inventory Models EOQ Model with.

To Accompany Ritzman & Krajewski, Foundations of Operations Management © 2003 Prentice-Hall, Inc. All rights reserved. Chapter 6 Capacity.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process.

13-1 McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

12 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall Importance of Inventory One of the most expensive assets of many companies Can be 50%

___________________________________________________________________________ Operations Research  Jan Fábry Inventory Models EOQ Model with Planned Shortages.

Independent Demand Inventory Planning CHAPTER FOURTEEN McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

13Inventory Management. 13Inventory Management Types of Inventories Raw materials & purchased parts Partially completed goods called work in progress.

12 – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Inventory Management 12.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Forecasting.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition © 2002 Prentice Hall, Inc. All rights reserved. Chapter 16.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition © 2002 Prentice Hall, Inc. All rights reserved. Chapter 9.

Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.

Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc.,

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Resource.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition © 2002 Prentice Hall, Inc. All rights reserved. Supplement.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Resource.

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Chapter 12 Inventory Management.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Financial.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Special.

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Inventory.

Supplement C Special Inventory Models

© 2008 Prentice Hall, Inc.S7 – 1 Operations Management Supplement 7 – Capacity Planning PowerPoint presentation to accompany Heizer/Render Principles of.

Week 14 September 7, 2005 Learning Objectives:

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Inventory.

To accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fourth Edition  1996 Addison-Wesley Publishing Company, Inc. All rights.

Aggregate Planning Chapter 14

Chapter 13 - Inventory Management

Inventory Models Assumptions of EOQ model Shortages are allowed

Lecture 23 Order Quantities

Managing Facilitating Goods

Chapter 18 Managing Facilitating Goods

Master Production Scheduling

Strategy Chapter 2.

Resource Planning Chapter 16

Chapter 10 Inventory Management

Learning Curve Analysis

Decision Making Supplement A

Acceptance Sampling Plans

Managing Risk Chapter 7.

Computer-Integrated Manufacturing

Simulation Supplement B

Presentation transcript:

Special Inventory Models Supplement E To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models On-hand inventory Time Figure E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production quantity Q On-hand inventory Time Figure E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production quantity Q Demand during production interval On-hand inventory p – d Time Figure E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production quantity Demand during production interval On-hand inventory Q Time p – d Figure E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production quantity Demand during production interval On-hand inventory Q Time p – d Figure E.1 Production and demand Demand only TBO To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production quantity Demand during production interval Production and demand Demand only TBO On-hand inventory Q Time p – d Figure E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production quantity Demand during production interval Maximum inventory Production and demand Demand only TBO On-hand inventory Q Time Imax p – d Figure E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production and demand Demand only TBO Production quantity Demand during production interval Maximum inventory On-hand inventory Q Time Imax p – d Figure E.1 Imax = (p – d) = Q( ) p To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production and demand Demand only TBO Production quantity Demand during production interval Maximum inventory On-hand inventory Q Time Imax p – d Figure E.1 C = (H) + (S) 2 D To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production and demand Demand only TBO Production quantity Demand during production interval Maximum inventory On-hand inventory Q Time Imax p – d Figure E.1 C = ( ) + (S) D Q p – d 2 p To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Production and demand Demand only TBO Production quantity Demand during production interval Maximum inventory On-hand inventory Q Time Imax p – d Figure E.1 ELS = p 2DS H To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = p p – d 2DS H Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year 2(10,500)($200) $0.21 190 190 – 30 ELS = Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year 2(10,500)($200) $0.21 190 190 – 30 ELS = Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year 2(10,500)($200) $0.21 190 190 – 30 ELS = Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels C = ( )(H) + (S) Q p – d 2 p D Q Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels C = ( ) ($0.21) + ($200) 4873.4 190 – 30 2 190 10,500 4873.4 Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels C = $430.91 + $430.91 Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels C = $861.82 Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels C = $861.82 ELS D TBOELS = (350 days/year) Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels C = $861.82 4873.4 10,500 TBOELS = (350 days/year) Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels C = $861.82 TBOELS = 162.4, or 162 days Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels ELS p C = $861.82 Production time = TBOELS = 162.4, or 162 days Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels 4873.4 190 C = $861.82 Production time = TBOELS = 162.4, or 162 days Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Setup cost = $200 Production rate = 190 barrels/day Annual holding cost = $0.21/barrel Annual demand = 10,500 barrels Plant operates 350 days/year ELS = 4873.4 barrels C = $861.82 Production time = 25.6, or 26 days TBOELS = 162.4, or 162 days Example E.1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Figure E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E.3 Total cost (dollars) Purchase quantity (Q) 0 100 200 300 (a) Total cost curves with purchased materials added To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E.3 C for P = $4.00 C for P = $3.50 C for P = $3.00 Total cost (dollars) Purchase quantity (Q) 0 100 200 300 (a) Total cost curves with purchased materials added To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E.3 C for P = $4.00 C for P = $3.50 C for P = $3.00 Total cost (dollars) First price break Second price break Purchase quantity (Q) 0 100 200 300 (a) Total cost curves with purchased materials added To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E.3 C for P = $4.00 C for P = $3.50 C for P = $3.00 Total cost (dollars) First price break Second price break Purchase quantity (Q) 0 100 200 300 (a) Total cost curves with purchased materials added To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E.3 C for P = $4.00 C for P = $3.50 C for P = $3.00 Total cost (dollars) PD for P = $4.00 PD for P = $3.50 PD for P = $3.00 First price break Second price break Purchase quantity (Q) 0 100 200 300 (a) Total cost curves with purchased materials added To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E.3 C for P = $4.00 C for P = $3.50 C for P = $3.00 Total cost (dollars) PD for P = $4.00 Total cost (dollars) PD for P = $3.50 PD for P = $3.00 First price break Second price break Purchase quantity (Q) 0 100 200 300 Purchase quantity (Q) 0 100 200 300 (a) Total cost curves with purchased materials added (b) EOQs and price break quantities To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E.3 C for P = $4.00 C for P = $3.50 C for P = $3.00 Total cost (dollars) PD for P = $4.00 Total cost (dollars) PD for P = $3.50 PD for P = $3.00 First price break Second price break Purchase quantity (Q) 0 100 200 300 Purchase quantity (Q) 0 100 200 300 (a) Total cost curves with purchased materials added (b) EOQs and price break quantities To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E.3 C for P = $4.00 C for P = $3.50 C for P = $3.00 Total cost (dollars) PD for P = $4.00 Total cost (dollars) PD for P = $3.50 PD for P = $3.00 First price break Second price break First price break Second price break Purchase quantity (Q) 0 100 200 300 Purchase quantity (Q) 0 100 200 300 (a) Total cost curves with purchased materials added (b) EOQs and price break quantities To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E.3 C for P = $4.00 C for P = $3.50 C for P = $3.00 EOQ 4.00 EOQ 3.50 EOQ 3.00 Total cost (dollars) PD for P = $4.00 Total cost (dollars) PD for P = $3.50 PD for P = $3.00 First price break Second price break First price break Second price break Purchase quantity (Q) 0 100 200 300 Purchase quantity (Q) 0 100 200 300 (a) Total cost curves with purchased materials added (b) EOQs and price break quantities To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price 2DS H EOQ57.00 = Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price 2(936)(45) 0.25(57.00) EOQ57.00 = Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price 2(936)(45) 0.25(57.00) EOQ57.00 = Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units C = (H) + (S) + PD Q 2 D Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units 75 2 936 75 C75 = [(0.25)($60.00)] + ($45) + $60.00(936) Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units C75 = $57,284 Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units C75 = $57,284 300 2 936 300 C300 = [(0.25)($58.80)] + ($45) + $58.80(936) Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units C75 = $57,284 C300 = $57,382 Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units C75 = $57,284 C300 = $57,382 500 2 936 500 C500 = [(0.25)($57.00)] + ($45) + $57.00(936) Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units C75 = $57,284 C300 = $57,382 C300 = $56,999 Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 $60.00 300 – 499 $58.80 500 or more $57.00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ57.00 = 77 units EOQ58.80 = 76 units EOQ60.00 = 75 units C75 = $57,284 C300 = $57,382 C300 = $56,999 Example E.2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Figure E.4 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 20 30 40 50 D Q 10 20 30 40 50 For Q = D Payoff = pQ Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 20 30 40 50 D Q 10 20 30 40 50 For Q = D Payoff = ($10)(10) Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 $100 20 30 40 50 D Q 10 20 30 40 50 For Q = D Payoff = $100 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 $100 $100 $100 $100 $100 20 30 40 50 D Q 10 20 30 40 50 For Q ≤ D Payoff = pQ Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 $100 $100 $100 $100 $100 20 200 200 200 200 30 300 300 300 40 400 400 50 500 D Q 10 20 30 40 50 For Q ≤ D Payoff = pQ Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 $100 $100 $100 $100 $100 20 200 200 200 200 30 300 300 300 40 400 400 50 500 D Q 10 20 30 40 50 For Q > D Payoff = pD – I(Q – D) Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 $100 $100 $100 $100 $100 20 200 200 200 200 30 300 300 300 40 400 400 50 500 D Q 10 20 30 40 50 For Q > D Payoff = ($10)(30) – ($5)(40 – 30) Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 $100 $100 $100 $100 $100 20 200 200 200 200 30 300 300 300 40 400 400 50 500 D Q 10 20 30 40 50 For Q > D Payoff = ($10)(30) – ($5)(40 – 30) Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 $100 $100 $100 $100 $100 20 200 200 200 200 30 300 300 300 40 400 400 50 500 D Q 10 20 30 40 50 For Q > D Payoff = $250 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 $100 $100 $100 $100 $100 20 200 200 200 200 30 300 300 300 40 250 400 400 50 500 D Q 10 20 30 40 50 For Q > D Payoff = $250 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 10 $100 $100 $100 $100 $100 20 50 200 200 200 200 30 0 150 300 300 300 40 –50 100 250 400 400 50 –100 50 200 350 500 D Q 10 20 30 40 50 For Q > D Payoff = pD – I(Q – D) Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Figure E.5 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 Expected payoff30 = 10 $100 $100 $100 $100 $100 20 50 200 200 200 200 30 0 150 300 300 300 40 –50 100 250 400 400 50 –100 50 200 350 500 D Q 10 20 30 40 50 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 Expected payoff30 = 0.2($0) 10 $100 $100 $100 $100 $100 20 50 200 200 200 200 30 0 150 300 300 300 40 –50 100 250 400 400 50 –100 50 200 350 500 D Q 10 20 30 40 50 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 Expected payoff30 = 0.2($0) + 0.3($150) 10 $100 $100 $100 $100 $100 20 50 200 200 200 200 30 0 150 300 300 300 40 –50 100 250 400 400 50 –100 50 200 350 500 D Q 10 20 30 40 50 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 Expected payoff30 = 0.2($0) + 0.3($150) + 0.3($300) 10 $100 $100 $100 $100 $100 20 50 200 200 200 200 30 0 150 300 300 300 40 –50 100 250 400 400 50 –100 50 200 350 500 D Q 10 20 30 40 50 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 Expected payoff30 = 0.2($0) + 0.3($150) + 0.3($300) + 0.1($300) 10 $100 $100 $100 $100 $100 20 50 200 200 200 200 30 0 150 300 300 300 40 –50 100 250 400 400 50 –100 50 200 350 500 D Q 10 20 30 40 50 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 Expected payoff30 = 0.2($0) + 0.3($150) + 0.3($300) + 0.1($300) + 0.1($300) 10 $100 $100 $100 $100 $100 20 50 200 200 200 200 30 0 150 300 300 300 40 –50 100 250 400 400 50 –100 50 200 350 500 D Q 10 20 30 40 50 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 Expected payoff30 = $195 10 $100 $100 $100 $100 $100 20 50 200 200 200 200 30 0 150 300 300 300 40 –50 100 250 400 400 50 –100 50 200 350 500 D Q 10 20 30 40 50 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 Expected payoff30 = $195 D Q 10 20 30 40 50 Expected Payoff 10 $100 $100 $100 $100 $100 20 50 200 200 200 200 30 0 150 300 300 300 195 40 –50 100 250 400 400 50 –100 50 200 350 500 Example E.3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 D Q 10 20 30 40 50 Expected Payoff 10 $100 $100 $100 $100 $100 $100 20 50 200 200 200 200 170 30 0 150 300 300 300 195 40 –50 100 250 400 400 175 50 –100 50 200 350 500 140 Figure E.6 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.2 0.3 0.3 0.1 0.1 Profit per ornament during season = $10 Loss per ornament after season = $5 D Q 10 20 30 40 50 Expected Payoff 10 $100 $100 $100 $100 $100 $100 20 50 200 200 200 200 170 30 0 150 300 300 300 195 40 –50 100 250 400 400 175 50 –100 50 200 350 500 140 Figure E.6 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.