Chapter 12 Inventory Management -Part B

# Chapter 12 Inventory Management -Part B - Management...

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Click to edit Master subtitle style 1/5/10 Chapter 12 Part B– Inventory  Management  Suman Niranjan

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1/5/10 Not in Syllabus Fixed Order Interval Model Single-Period Model 22
1/5/10 Quantity Discounts Annual carryin g cost Purchasin g cost TC   = + Q 2 H   D Q S TC  =  + + Annual orderin g cost PD   + 33

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1/5/10 Total Costs with PD Cost EOQ TC with PD TC without PD P D 0 Quanti ty Adding Purchasing  cost doesn’t change EOQ 44
1/5/10 Total Cost with Quantity  55

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1/5/10 Carrying Costs Two types of carrying costs Fixed or constant per unit Specified as a fixed percentage of unit price Determining best purchase quantity when  carrying costs are constant 1. Compute the minimum order quantity (EOQ) 2. Only one unit price will have the EOQ in feasible  range a) If the feasible EOQ is on the lowest price range,  that is the optimal order quantity. b) If the feasible EOQ is in any other range, compute  66
Example 5 The maintenance department of a large hospital  uses about 816 cases of liquid cleanser annually.  Ordering costs are \$12, carrying costs are \$4 per  case a year, and the new price schedule indicates  that orders of less than 50 cases will cost \$20 per  case, 50 to 79 cases will cost \$18 per case, 80 to  99 cases will cost \$17 per case, and larger orders  will cost \$16 per case. Determine the optimal  order quantity and the total cost. 77

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## This note was uploaded on 01/04/2010 for the course OPM 311 taught by Professor Rui during the Spring '08 term at Binghamton.

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Chapter 12 Inventory Management -Part B - Management...

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