Cours 4 Flashcards
What are the 2 models of inventory replenishment?
- Reorder point model (continuous review system).
- Fixed-interval model (periodic review system).
What are the characteristics of the reorder point system?
- Quantity to order: Fixed quantity (EOQ)
- Time to order: When reaching reorder point
- Inventory type: Permanent
- Safety stock: For an equal service level, smaller than the periodic review system.
- Item class: Classes A and B (critical and/or expensive)
- Total annual cost calculations: EOQ because we always order the same quantity.
What are the characteristics of the periodic review system?
- Quantity to order: Variable
- Time to order: at fixed intervals
- Inventory type: periodical
- Safety stock: For an equal service level, larger than the reorder point system.
- Item class: Classes B and C
- Total annual cost calculations: Average quantity because order quantity varies.
Which values do we round?
The actual quantities:
- A forecast
- An economic order quantity (EOQ)
- A quantity to be ordered (Q)
- A reorder point (ROP)
- A safety stock (SS)
Which values do we keep as they are?
Averages:
- An average demand (d)
- An average quantity ordered
- An average number of orders
- A standard deviation of demand
What is a reorder point (ROP)?
This is the point at which the inventory on hand reaches a predetermined level signaling that it is time to place a new order in order to ensure that the new inventory arrives by the time the inventory on hand is depleted. The reorder point thus takes into account the demand rate for the product as well as lead time.
What is the average demand rate (d)?
This is the rate at which the products are utilized.
What is the lead time (LT)?
This is the amount of time between the placement of an order and the reception of the items at the warehouse.
How do we find the reorder point?
By multiplying the average demand and the lead time.
