Cheat Sheet Final

Cheat Sheet Final - Continuous (perpetual) system Fixed...

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Continuous (perpetual) system Fixed quantity is ordered when a certain level is reached -Good: (1) Keeps constant count of inventory and (2) fixed order quantity. -Bad: (1) Higher record keeping cost; (2) Periodic inventory counting is still required; (3) Time of delivery is random. Inventory turns = D / (Q/2 + SS) Inventory Turn = D / Average Inventory -in continuous systems shortage will happen only during leadtime, the time b/t when an order is placed and when it is received (ROP, Q) policy -Order when the inventory reaches the ROP -The order size is always Q Safety Stock: Stock that is held in excess of expected demand due to variable demand rate and/or lead time. -determined by demand variability and target service level. - Safety stock = z*(st. dev. of demand over review and lead time) -safety stock = z * σ * √L or dL + ss d = avg daily demand; L = leadtime; z = z value; σ = st of demand over leadtime If you reduce lead time L↓ σ↓ Target inventory ↓ SS ↓ ; If cost of placing an order is reduced Q↓ RP unchanged
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This note was uploaded on 02/15/2011 for the course BUAD 311 at USC.

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Cheat Sheet Final - Continuous (perpetual) system Fixed...

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