INVENTORY - INVENTORY BY DHEERAJ BAHL INVENTORY Stock of good items maintained to full fill present future need of an organization Manufacturer Raw

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INVENTORY BY DHEERAJ BAHL
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INVENTORY Stock of good items maintained to full fill present Manufacturer:- Raw material stock, spare parts, semi furnished goods Hospital :- Stock of drugs Book-Store :- Books & Stationary
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Why inventory is maintained? It provides service to the customer immediately or at a short period Due to absence of stock the company may have to pay high price because of piecewise purchasing Maintaining of inventory may earn price discount because of bulk purchasing Inventory acts as a buffer stock when raw material are received late so many sale orders are likely to be rejected
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Various costs involved Procurement Cost:- Associated costs are a) Set up cost:- K per cycle b) Purchase or production cost:- Co per unit Holding cost :- C 1 per unit of item per unit of time - Storage Cost - Handling Cost - Record keeping & Administrative cost Shortages or penalty Cost ( Cost of back orders or shortage ) C 2 Cost per unit of back order per unit of time
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Inventory Decision DECISION How much amount of Item is order when inventory of item is to be replenished When to order ??
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a) K = Set up Cost per cycle b) C 0 = Manufacturing or purchase cost per unit c) C 1 = Holding cost per unit per unit of time d) D = Demand rate in units per unit of time e) A = No. of units of item produced (or delivered) per unit of time. f) Q = No. of unit arrived (or produce) per cycle or per order (or per run) g) Ordering Cycle h) t = length of cycle I ) Stock replenishment j) Lead time
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Deterministic Inventory Model Model 1 :- Single item, Static demand, Production model with no back ordering allowed (Finite and constant delivery rate during the production run) No shortages are allowed Lead time is zero A>D S = Maximum level of inventory s = Minimum level of inventory
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Deterministic Inventory Model Whenever inventory level reaches a minimum level & a quantity is order so that inventory reaches a maximum level s at some later time t 1 Time period during which items are arrived (or produce) until complete order is received. During this time period inventory build up with a rate A-D, from minimum level s to maximum level S
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Deterministic Inventory Model t 2 Time period during which arrival stops At the end of the time period a reorder is to be made. t 0 Length of order cycle t 0 =t 1 +t 2
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t1 t2 to time Inventory level s S
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Q= At 1 = Dt 0 ---------- 1 S=s+(A-D)t 1 =s+(A-D)Q/A-----(from)1 =s+(1-D/A)Q --------2 And S-Dt 2 =s ---------2 C o =Manufacturing Cost Per unit K=set up cost per cycle • C 1 =Holding cost per unit, per unit of time
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Inventory holding cost = where I(t) is inventory level time t (3) For [0,t 1 ] I(t) =s + (A-D) t For [t 1 ,t 2 ] I(t)= S-D(t-t 1 ) Substitute value in (3),Inventory holding cost per cycle is =[C 1 s+0.5 C 1 Q(1-D/A)] t 0 Thus total cost of an order cycle is function of s,Q
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This note was uploaded on 02/23/2011 for the course MATH 122 taught by Professor Ritadubey during the Spring '11 term at Amity University.

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INVENTORY - INVENTORY BY DHEERAJ BAHL INVENTORY Stock of good items maintained to full fill present future need of an organization Manufacturer Raw

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