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Krajewski SN Supplement D - Supplement D Special Inventory...

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Supplement D Special Inventory Models A. Noninstantaneous Replenishment 1. Maximum cycle inventory Maximum cycle inventory is: I max = Q p p - d ( 29 = Q p - d p where = p production rate = d demand rate = Q lot size Cycle inventory is no longer 2 Q , as with the basic EOQ method, instead, it is what? 2. Total cost Total annual cost = Annual holding cost + Annual ordering or setup cost ( 29 ( 29 ( 29 ( 29 S Q D H p d p Q S Q D H I C + - = + = 2 2 max 3. Economic Production Lot Size (ELS): optimal lot size a. Derived by calculus: d p p H DS ELS - = 2 b. Why does the ELS result in a larger lot size than the EOQ? SN:D-1
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SN:D-2 Supplement D: Special Inventory Models 4. Application D.1: Noninstantaneous Replenishment to show the difference between the ELS model and the EOQ model. A domestic automobile manufacturer schedules 12 two-person teams to assemble 4.6 liter DOHC V-8 engines per work day. Each team can assemble 5 engines per day. The automobile final assembly line creates an annual demand for the DOHC engine at 10,080 units per year. The engine and automobile assembly plants operate
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