BUSI 2301 Lecture Notes - Safety Stock, Economic Order Quantity, Economic Production Quantity
5 Mar 2014
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Document Summary
Basic qs: how much to order, when to order. Functions of inv: to meet anticipated demand, wait while being transpo"d, protect against stock-outs, take advantage of economic lot size and quantity discount, smooth seasonal production reqm"s, decouple ops, hedge against price increases. To keep track of inv, replenishment model: reliable forecasts of dmd and knowledge of lead times, reasonable est of inv holding, ordering, and shortage costs, abc classification. Fixed order quantity/reorder point model: when the inv falls below a certain point they reorder a fixed amount same as before. Two bin system: two containers of inv, reorder when the first is empty. Lead time: time interval between ordering and receiving the order. Cost in4mation: holding costs, ordering costs, setup costs, shortage costs. Dmd is spread evenly thru year, so dmd rt constant. Each order is received in a single delivery. Total cost = annual carrying cost + annual ordering cost.
