# EOQ 1 - Universitt zu Kln Seminar fr Allgemeine Supply...

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© Prof. Dr. Ulrich W. Thonemann Universität zu Köln Seminar für Allgemeine Betriebswirtschaftslehre, Supply Chain Management und Management Science Discussion Session Economic Order Quantity (EOQ) Model

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Chart 1 CONTENTS ± Exercise 1: Basic EOQ Model ± Exercise 2: EOQ Model with All Units Discounts ± Exercise 3: Inventory Control at Johnson Products Company
Chart 2 STANDARD COST FUNCTION AND OPTIMAL SOLUTION c Variable order cost [€/unit] K Fixed order cost [€/order] h Unit inventory holding cost [€/unit/year] Cost Variable x Order quantity [units] Cost function x Z(x) c K h x2 μ =μ+ + * 2K x h μ = * Z(x ) 2K h c = μ+ μ Economic order quantity

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Chart 3 1A: DETERMINATION OF COST FACTORS ± 2,800 pounds per year sold ± 2.40 € per pound for coffee farm ± 6% margin per pound 10 € per order for exporting company ± 45 € per order for paperwork, labor ± 2% taxes, insurances ± 0.15 € storage ± 0.5% damaged / spoiled goods ± 20% opportunity rate Data Solution
Chart 4 1B AND 1C: ECONOMIC ORDER QUANTITY AND OPTIMAL COST Data Solution ± Demand rate μ = 2,800 ± Variable order cost c = 2.59 € ± Holding cost rate h = 0.68 € ± Setup cost K = 55 €

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Chart 5 1D: ORDERING 10% MORE OR 10% LESS Data Solution ± EOQ x* = 673 ± Optimal cost Z(x*) = 7.709,65 €
Chart 6 1E: SENSITIVITY IN GENERAL 0 1 2 3 4 0 1 02 03 04 0 Cost thousand €/year Order quantity units Fixed order cost Inventory holding cost Total cost* * Without variable order cost

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EOQ 1 - Universitt zu Kln Seminar fr Allgemeine Supply...

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