MAN 4504 Lecture Notes - Lecture 17: Carrying Cost, Lead Time

• School: University of Florida
• Department: Management
• Course: MAN 4504
• Professor: Munson Adam B.

Document Summary

Lecture 17: the eoq model basic eoq model. Minimizing the sum of setup/ordering & holding costs = total costs minimized. Optimal order size will minimize total costs. A reduction in either cost reduces total costs. Optimal order quantity occurs when holding cost & setup cost are equal: the eoq model. Total annual cost = set up cost + holding cost + product cost: the robust model. > it works even if all parameters & assumptions are not met. The total cost curve is relatively flat in the area of the eoq: reorder point. Eoq answers the question of how much? . The reorder point answers when? to order. Lead time is time between placing & receiving order: quantity discount models. Reduced prices are often available when larger quantities are purchased. Trade-off is between reduced product cost & increased holding cost.