BUAD446 Lecture Notes - Lecture 6: Carrying Cost, Total Order, Customer Service
25 Oct 2016
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Example: walmart inventory management: 5000+ in 10 countries, knowing what"s in stock, what quantity, where it"s being held. Assumptions: 1. demand rate is known and constant, 2. Only relevant costs are holding and ordering/setup costs: only the ordering and set up effort, 4. Decisions for items are independent from other items: ordering all products at same time instead of ordering 1 at a time from ge, not true in this case, order 1 product at a time once inventory drops, 5. Example: d=2700, just like the diagram above with the total = order+holding. Eoq formula look bw 400 and 500, little difference in the total annual cost: total cost curve is relatively flat, means if we can get close to the total order quantity, we will have good total annual cost. Example on how this works inventory position reflects the new order (oh)
