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311cribsheetquiz4

# 311cribsheetquiz4 - E OQ Model Total cost= DC(D/Q)S(Q/2)H...

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EOQ Model: Total cost= DC +(D/Q)S +(Q/2)H =annual purchase cost + annual ordering cost+ annual holding cost total holding cost= average inventory * annual holding cost= q/2 *H Total set up cost= annual ordering cost= Demand/quantity * set up cost each time Total purchasing cost= quantity per batch * number of orders/year * price/unit Economic order quantity= the batch that incurs the least costs Number of orders= annual demand/ order quantity Frequency of orders= 12months/ number of orders Quantity that minimizes the cost= sqrt(2DS/h) Optimal batch size= EOQ= sqrt(2DS/H)=sqrt(2*Annual demand* annual set up cost/ annual holding cost/unit) Inventory related cost= D/q*S + Q/2*H Newsvendor Model : S: Set-up cost (per order) / h: Holding cost (per unit per period) / c: Purchasing cost (per unit) / v: Salvage value (per unit)–The value of salvage, at the end of the horizon, for excess inventory / p: Revenue per unit / g: Goodwill cost When probabilities given, calculate the orders with proba given to find the best order quantity Shortage cost= p-c Overage cost= c-v Marginal value analysis: The expected Marginal Value = - Expected overage cost : (c - v) * Pr {Demand<=Q} + Expected additional profit: (p - c) * Pr {Demand>Q} To find the optimal purchase quantity, set the marginal value to zero (or choose the first purchase quantity for which the marginal value becomes negative for a discrete demand distribution - So, increase the order size until P(D Q) C U / (C O +Cu) where Co is overage cost and Cu underage cost

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311cribsheetquiz4 - E OQ Model Total cost= DC(D/Q)S(Q/2)H...

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