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Unformatted text preview: Space IOE 202: Lecture 2 outline Announcements Last time... Inventory management problems and models:
Economic Order Quantity models: continued A diﬀerent inventory management situation (and a Linear Programming model) IOE 202: Operations Modeling, Fall 2009 Page 1 Space Last time
Problems of maintaining and replenishing inventory
One of the issues: balancing holding costs vs. ordering and shortage costs Long-term planning:
First example: a problem with
Known, steady demand Known costs (setup and per unit ordering, holding) that do not change over time Known lead time that does not change over time No (planned) shortages allowed Continuous review Select a batch size Q items Order a batch of size Q just as you are about to run out What is the “Economic Order Quantity”?
Page 2 Approach to managing inventory:
What value of Q maximizes net proﬁts?
IOE 202: Operations Modeling, Fall 2009 Space Inventory level over time Q
Inventory Level -a Q/a
Time IOE 202: Operations Modeling, Fall 2009 Page 3 Space Inputs and outputs of EOQ models Deﬁnition Units a Demand per unit of time unit/unit of time L Lead time units of time K Setup cost for ordering one batch $ c Cost for purchasing one unit $/unit h Holding cost per unit per unit of time held $/(unit×unit of time) Q Order Quantity (batch size) unit Q /a Time between orders unit of time T (Q ) Cost per unit of time $/unit of time Note: sales revenue d...
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- Fall '09