1. Inventory Management III EOQ Notes & Some Extensions Lecture 6 ESD.260 Fall 2003 Caplice

2. Assumptions: Basic EOQ Model Demand Constant vs Variable Known vs Random Continuous vs Discrete Lead time Instantaneous Constant or Variable (deterministic/stochastic) Dependence of items Independent Correlated Indentured Review Time Continuous vs Periodic Number of Echelons One vs Many Capacity / Resources Unlimited vs Limited Discounts None All Units or Incremental Excess Demand None All orders are backordered Lost orders Substitution Perishability None Uniform with time Planning Horizon Single Period Finite Period Infinite Number of Items One Many MIT Center for Transportation & Logistics - ESD.260 2 © Chris Caplice, MIT

3. Managing Multiple Locations MIT Center for Transportation & Logistics - ESD.260 3 © Chris Caplice, MIT

4. Managing Multiple Locations MIT Center for Transportation & Logistics - ESD.260 4 © Chris Caplice, MIT

5. Managing Multiple Locations MIT Center for Transportation & Logistics - ESD.260 5 © Chris Caplice, MIT PolicyEOQ Locations1N Lot SizeQq Avg InvQ/2N[Q/2] Order CostO Q1 N[O Q1 ] Holding CostH Q1 N[H Q1 ] Total CostO Q1 +H Q1 N[O Q1 +H Q1 ]

6. Lot Sizing: Many Potential Policies MIT Center for Transportation & Logistics - ESD.260 6 © Chris Caplice, MIT PolicyFixed Order SizeDays of Supply Locations1N1N Lot SizeTTMm Avg InvT/2N[T/2]M/2 Order CostO T1 O M1 NO M1 Holding CostH T1 NH T1 H M1 Total Cost O T1 +H T1 O T1 +NH T1 O M1 +H M1 NO M1 +H M1

7. Inventory Turnover Median Turns per Year MIT Center for Transportation & Logistics - ESD.260 7 © Chris Caplice, MIT Plant Inventory Field Inventory 3rd Party Whse Year Source: OSU Survey of Career Patterns in Logistics

8. Managing Inventory Turn Rates MIT Center for Transportation & Logistics - ESD.260 8 © Chris Caplice, MIT

9. Managing Multiple Items MIT Center for Transportation & Logistics - ESD.260 9 © Chris Caplice, MIT