Modelling & quantitative analyses Flashcards
Analytical models
Can be solved with math
Deterministic & stochastic
Deterministic
No uncertainty incorporated
Input directly linked to output
Everyone gets same outcome
Stochastic
Uncertainty incorporated
Input + randomness –> output
Everyone gets same outcome
Simulation models
No closed solution, outcome cant be calculated
Depending on number of times used, different outcome
EOQ model
To see what optimal inventory level is
Balance between ordering costs and inventory costs
Assumes that demand, holding and ordering costs remain constant over time
Types of inventory costs
Holding & shortage costs
Q
order quantity
L
Lead time
Time between reorder point and order received
Q/2
Average quantity
H
annual holding cost / unit
D
annual demand
How many orders?
D/Q
K
Fixed cost of placing an order
R
At what level of inventory to reorder
d
average daily demand
D/365
