MAN 3504 - Indep Demand Inventory Mgt (6 slides per page)

MAN 3504 - Indep Demand Inventory Mgt (6 slides per page) -...

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Unformatted text preview: MAN 3504 -- Indep. Demand Inventory Mgt. (Part 2) 1 Independent Demand Inventory Management MAN 3504: Independent Demand Inventory Management Part 2 (Part 2) EOQ with Quantity Discounts Model The way we make quantity decision is affected; means to make timing decision is not Purchase costs are now relevant MAN 3504: Independent Demand Inventory Management Part 2 2 Example: D = 2500; S = $15; H = 30% of purchase cost; If 1 < Q < 75, then purchase cost/unit = 10.00 If 75 < Q < 300, then purchase cost/unit = 9.80 If Q > 300, then purchase cost/unit = 9.70 Quantity Discounts Model Procedure 1. Assume cheapest purchase cost 2. Compute EOQ using that cost; if EOQ not in range for that cost, change EOQ to value within the range that is closest to EOQ; this value becomes a candidate for the best answer: EOQ = { [2(2500)(15)] / [.30(9.70)] } 1/2 = 160.54 (EOQ 9 70 = 300) MAN 3504: Independent Demand Inventory Management Part 2 3 9.70 3. If computed EOQ was in range for that price, go to step (4); if not, assume next cheapest purchase cost and repeat step (2): EOQ = { [2(2500)(15)] / [.30(9.80)] } 1/2 = 160 (EOQ 9.80 = 160) 4. Compute total costs for all candidates: TC Q=160 = (2500 / 160)(15) + (160/2)(.30)(9.80) + (2500)(9.80) = 24,969.48 TC Q=300 = (2500 / 300)(15) + (300/2)(.30)(9.70) + (2500)(9.70) = 24,811.50 Reorder Point (ROP) & Safety Stock (SS) Models When demand / lead time unknown , we cannot guarantee no shortages Thus, to keep shortages down, we must augment the way the timing (i.e. the reorder point ) decision is made MAN 3504: Independent Demand Inventory Management Part 2 4 ROP = d(LT) reflects demand during the lead time (DDLT) ; as long as both d and LT (& thus DDLT) are known, then this ROP will keep us from running out of stock But : What happens if demand per day happens to be larger...
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This note was uploaded on 09/11/2011 for the course MAN 3504 taught by Professor Staff during the Spring '11 term at UNF.

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MAN 3504 - Indep Demand Inventory Mgt (6 slides per page) -...

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