Formula Sheet
1.
Productivity
Productivity = Output/Input
2.
Process Analysis
Little's Law:
I= T * R, where I
inventory, R the throughput rate and T the flow time.
3.
Inventory Management
Notation:
D= average annual demand;
S =
average cost of processing an order (or making a production setup)
H = average cost of holding an item in inventory a year
a)
Economic Order Quantity
H
DS
2
*
Q
=
b)
Fixed Order Quantity Models
Safety Stock
Service level = 1 Probability of Stockout
Safety stock computations for continuous distribution of demand
L =
lead time
L
µ
=
mean demand over the lead time;
L
σ
= standard deviation of demand over the lead time
Reorder point = ROP =
L
+
L
z
Safety Stock = SS =
L
z
, where z = number of standard deviations from the mean demand required to
achieve the desired service level.
Case 1: Variable demand rate N(
d
,
d
σ
), constant lead time
L
d
L
z
L
d
ROP
×
×
+
×
=
value
inventory
aggregate
Average
sold
goods
of
Cost
turnover
Inventory
=
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d be the demand and
d
σ
the standard deviation of demand over unit time, then we can determine
the mean demand over the lead time as
L
d
L
×
=
µ
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 Spring '08
 unknown
 Standard Deviation, Cycle Time, average number, Stockout

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