ITM 601 Lecture Notes - Lecture 11: Carrying Cost

• School: Ryerson University
• Department: Information Technology Management
• Course: ITM 601
• Professor: Selcuk Savas

Document Summary

Resource planning mrp: bill of materials, all subassemblies are based on major product. Ex: a: the plan for the top item has to be forecasted. Forecasts using customer orders and past sales data: plan for major product is called mps. Applies to both make (produce) or buy (purchase) items: planning lead time consists of estimates for. Interested in how to reduce lead times: lot-sizing rules. For certain items, you have to buy them in larger quantities. Periodic order quantity (poq) ordering for a certain number of intervals. If the order cost is somehow high, it discourages you to place frequent orders. Tradeoff is between ordering frequently so the holding cost will be high or do you want to order less frequently which means your holding cost will be small. Balances l4l and fixed lot size: safety stock. Basically, it is inventory you carry just in case.