Inventory planning Flashcards
What does EOQ stand for in inventory planning
Economic order quantity
What are the two questions of inventory models and what is the objective
How much should be oredered, when should the reordering occur. The obejective is to minimize the variable cost over a period
What are the five inventory costs
Ordering costs, holding costs, backorder cost and purchase cost
What are backorder costs
Costs associated with being out of stock when an item is in demand
What are the assumptions of the Economic Order Quantity Model
Demand, ordering cost, holding cost, purchase cost per unit and delivery time are all constant and planned shortages are not permitted.
What is the formula of the optimal order quantity in EOQ
(2demandorder_cost/holding_cost)^.5
What is the formula for number of orders durring the period and time between orders (cycle time) in EOQ
Demand divided by optimal order quantity for orders per year and optOQ/D for cycle time
What is the formula for the total annual cost of inventory in EOQ
holding cost + ordering cost = [(QHC)/2] + [DP/Q]
Q= order quantity
HC = hoding cost per item
D = items demanded
P = price of item
What does it mean when holding cost is 20%
That the holding costs are 20% of the price
What is the economic production lot size model
A variant of the EOQ model where inventory is not delivered in one batch and thus must have a production rate higher than the demand rate.
When is there an optimal lot size in the economic production lot size model
When the annual hodling cost and the annual set-up costs are equal
What are the assumptions of the economic production lot size model
Demand, Setup-cost, Holding cost, Production rate, Purchase cost and the stepup time is constand and the prodiction rate is greater than demand as well as planned shortages being forbiden
What is the formula for an optimal production lot size
(2DSC/(1-D/P)*HC)^.5
D = Demand
SC = setup cost
P = Production rate
HC = Holding cost
What is the total annual cost in the economic production lot size model
{((1-D/P)QHC)/2} + {D*SC/Q} =
holding cost + ordering cost
D = Demand
P = Production rate
Q = order quantity
HC = Holding cost
SC = setup cost
How do you calculate maxumum inventory in the production lot size model
(1- D/P)*Q
D=Demand
P=Production rate
Q = order quantity
What is EOQ with Planned Shortages
A version of EOQ ehere the repelenishemnt order does not arrive at or before the inventory position drops to zero. This means that shortages will occur untill the backorder quantity is reached.
When is the EOQ with Planned Shortages model optimal
When the backorder quantity combination, annual holdings and backorder costs equal annual ordering costs
What are the assumptions of the EOQ with Planned Shortages model
Demand, ordering& holding & backorder& purchase costs and setup time are constand while planned shortages are permitted.
What is the optimal order quantity in the EOQ with planned shortages model
(2DOC/HC)^.5 * ((HC + BC)/BC)^.05
D = Demand
OC = orddering cost
HC = holding cost
BC = backorder costs
What is the maximum number of backorders in EOQ with planned shortages model
Q*(HC/(HC+BC))
Q = Order quantity
HC = Holding cost
BC = backorder cost
What is the total period cost in the EOC with planned shortages model
(HC(Q-S)^2)/(2Q) + DOC/Q + S2BC/2*Q
holding + ordering + backorder costs
HC = holding cost
Q = Order quantity
S = number of backorders
D = Demand
BC = backorder cost
OC = order cost
What is EOQ with quantity discount
A version of EOQ where lower purchase costs are offered when an item is ordered in larger quantities. For the optimal order quantity, the annual holding and ordering costs are not necessarily equal like in the other models.
What are the assumptions of EOQ with quantity discount model
Demand, Ordering & Holding costs and lead time is constant while there are different purchase costs and planned shortages are not permitted
The method of calculating total anual cost for EOQ and EOQ with pquantity discount is the same
No they are almost the same but With quantity discount also adds purchase cost at the end D*C
If the optimal order quantity is infeasible does it mean that the option cannot have the minimal total cost
No
