presentacic3a3c2b3n-1-eoq

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INVENTORYMODELS

FOR INDEPENDENT DEMAND


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DEPENDENT AND INDEPENDE

DEMAND Independent demand is demand for a fnished pro

such as a computer, a bicycle, or a pizza.

Dependent demand, on the other hand, is demand focomponent parts or subassemblies.For example

would be the microchips in the computer, the wheelsthe bicycle, or the cheese on the pizza.


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INVENTORY MODELS FOR

INDEPENDENT DEMANDWe are going to use the Basic Economic Orer!uantit"#EO!$ an the Prouction Orer !uantit" Moans'er to the ne(t )uestions*

When to order?

How much to order?


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T+E BASI, E,ONOMI, ORDE

!-ANTITY #EO!$It is one o. the o%est an most common%" /no'n in0entocontro% techni)ues1 it has se0era% assum2tions*

Deman is /no'n

Lea time

Recei2ts are instantaneous an com2%ete

No )uantit" iscounts

Setu2 costs an ho%ing costs are 0aria3%e costs

Stoc/out can 3e a0oie


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OB4E,TIVE OF INVENTORY MODELS 56 MINIMI7E T,OST


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To o3tain the !8 are necessa

some ste2s91 De0e%o2 an e(2ression .or setu2 or orering cost

:1 De0e%o2 an e(2ression .or ho%ing cost

;1 Set setu2 cost e)ua% to ho%ing cost


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Varia3%es*

! = Num3er o. units 2er orer

!8 = the o2tima% num3er o. units 2er orer #EO!$

D = Annua% eman in units .or the in0entor" item

S = setu2 or orering cost .or each orer

+ = ho%ing or carr"ing cost2er unit 2er "ear


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E(2ecte num3er o. orer #N$ = Deman>Orer !uan

D>!8

E(2ercte time 3et'een orers #T$ = Num3er o. 'or/a"s 2er "ear> N

Tota% annua% cost = Setu2 cost ? +o%ing cost


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REORDER POINT

Sim2%e in0entor" moe% assume that recei2t o. an orer isinstantaneous

+OWEVER

The time 3et'een 2%acement an recei2t o. an orer& lead#or e%i0er" time$& ta/e time #shorter or %onger$

The 'hen5to5orer ecision is usua%%" e(2resse in terms oreorer 2oint (ROP)


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ROP

Thus & the 'hen5to5orer ecision is usua%%" e(2resse in terms o.reorder point (ROP) 556 the in0entor" %e0e% at 'hich an orer s3e 2%ace

This e)uation .or ROP assumes that eman uring %ea time antime itse%. are constant1 When this is not the case 'e shou% a t

safety stock.

ROP = #Deman 2er a"$ ( #Lea time .or a ne' orer in a"s$

The eman 2er a" #$ = D>Num3er o. 'or/ing a"s in a "ear


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E@ER,ISE

Shar2 Inc a com2an" that mar/ets h"2oermic nee%es to hos2ita%s 'oureuce its in0entor" cost 3" etermining the o2tima% num3er o. h"nee%es to o3tain 2er orer1 The annua% eman is 9 units& the setuorering cost is C9 2er orer& an the ho%ing cost 2er unit 2er "ear

Assuming that the com2an" has a : a" 'or/ing "ear& ca%cu%ate*

The o2tima% num3er o. units 2er orer

The num3er o. orers The e(2ecte time 3et'een orers

Deman 2er a"1

The reorer 2oint1

Determine the com3ine annua% orering an ho%ing cost


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ROB-ST MODEL

A 3enet o. the EO! moe% is that it is ro3ust& that methat it gi0es satis.actor" ans'er e0en 'ith su3stantia%

0ariation in 2arameters& so 0ariations in setu2 costs& hcosts& eman& or e0en EO! ma/e re%ati0e%" moest

iGerences in tota% cost1


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91#Annua% in0entor" ho%ing cost$ = #A0erage in0entor( +

:1#A0erage in0entor" %e0e%$ = #Ma(imum in0entor" %e0

;1#Ma(imum in0entor" %e0e%$ = !#95 >2$


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EXERCISENathan Manu.acturing& Inc1& ma/es an se%%s s2ecia%t" hu3ca2s .or the retaiautomo3i%e a.termar/et1 A Nathans .orecast .or its 'irg 'hee% hu3ca2 is 9&

ne(t "ear& 'ith an a0erage ai%" eman o. < units1 +o'e0er& the 2rouctionis most eGicient at J units 2er a"1 So the com2an" 2rouces J 2er a" 3ut u< 2er a"1 The com2an" 'ants to so%0e .or the o2timum num3er o. units 2er #Note* This 2%ant scheu%es 2rouction o. this hu3ca2 on%" as neee& uringa"s 2er "ear the sho2 o2erates1$

Annua% eman = D = 9& units

Setu2 costs = S=C9+o%ing cost = + = C1 2er unit 2er "ea

Dai%" 2rouction rate = 2 = J units ai%"

Dai%" eman rate= = < units ai%"


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In aition& 'hen annua% ata are use& !82 can 3e e(2resse as*

Example. Leonar Pres3"& Inc1& has an annua% eman rate o. 9& u

can 2rouce at an a0erage 2rouction rate o. :& units1 Setu2 costcarr"ing cost is C91 What is the o2tima% num3er o. units to 3e 2roucetimeK


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E@ER,ISE

The Warren W1 Fisher ,om2uter ,or2oration 2urchases J& transi

"ear as com2onents in minicom2uters1 The unit cost o. each transistor ithe cost o. carr"ing one transistor in in0entor" .or a "ear is C;1 OrerC; 2er orer1 What are

#a$ the o2tima% orer )uantit"&

#3$ the e(2ecte num3er o. orers 2%ace each "ear& an

#c$ the e(2ecte time 3et'een orerK Assume that Fisher o2erates on 'or/ing "ear


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E@ER,ISE

Annua% eman .or the note3oo/ 3iners at Duncans Stationer" Sho2 isunits1 Dana Duncan o2erates her 3usiness ; a"s 2er "ear an ns te%i0eries .rom her su22%ier genera%%" ta/e 'or/ing a"s1 ,a%cu%ate th2oint .or the note3oo/ 3iners1


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E@ER,ISEJ!E "td. is a cosmetics store that sales excl#si$ely an or%anic #nisex hydcream. Each cream &ottle &o#%ht to its pro$ider costs '. *he store salesa$era%e of + &ottles per day &ein% the yearly demand of , #nits. E$ery

J!E "td. places an order to its pro$ider inc#rs a cost of ,- and the cost one #nit is + per year. Each order takes + days to arri$e to the store. Ca

9$ Economic Orer !uantit"

:$ Num3er o. orers to 3e 2%ace in the 2%anning horion #one "ear$1

;$ Time 3et'een t'o corre%ati0e orers1


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E@ER,ISE

0RO1!IE ss. is a company that sales molds for cakes. Each day the company sa$era%e - molds. Each mold costs +,.- and for each order placed to its pro$idecompany inc#rs a cost of - . *his partic#lar pro$ider takes one 2eek to ser$e dditionally3 ha$in% the mold in the 2areho#se costs +.,- 4day. 5no2in% that thplannin% period is one year ('6 days)3 please3 determine/

9$ The Economic Orer !uantit"

:$ The num3er o. orers that must 3e 2%ace in the 2%anning horion1

;$ The num3er o. a"s 3et'een recei0ing t'o orers1

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