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chapter12b

# chapter12b - Operations Operations Management Management...

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12-1 Operations Operations Management Management Inventory Management Inventory Management Chapter 12 - Part 2 Chapter 12 - Part 2

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12-2 Outline Outline Functions of Inventory. ABC Analysis. Inventory Costs. Inventory Models for Independent Demand. Economic Order Quantity (EOQ) Model. Production Order Quantity (POQ) Model. Quantity Discount Models. Probabilistic Models for Varying Demand. Fixed Period Systems.
12-3 Material is not received instantaneously. For example, it is produced in-house. Other EOQ assumptions apply. Model provides production lot size (like EOQ amount) for one product. Similar to EOQ with setup cost rather than order cost. Production Order Quantity Model Production Order Quantity Model

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12-4 Consider one product at a time. Produce Q units in a production run; then switch and produce other products. Later produce Q more units in 2nd production run ( Q units of product of interest). Later produce Q more units in 3rd production run, etc. Production Order Quantity Model Production Order Quantity Model
12-5 POQ Model Inventory Levels POQ Model Inventory Levels Inventory Leve Inventory Leve l l Time Time Production Production Begins Begins Production Production Run Ends Run Ends Production portion of cycle Production portion of cycle Demand portion of cycle with no Demand portion of cycle with no production (of this product) production (of this product)

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12-6 POQ Model Inventory Levels POQ Model Inventory Levels Inventory Leve Inventory Leve l l Time Time Production Production Begins Begins Production Production Run Ends Run Ends Production rate = p = 20/day Demand rate = d = 7/day Slope = -d = -7/day Slope = p-d = 13/day Note: Not all of production goes into inventory
12-7 POQ Model Inventory Levels POQ Model Inventory Levels Inventory Leve Inventory Leve l l Time Time Production Production Begins Begins Production Production Run Ends Run Ends Production rate = p = 20/day Demand rate = d = 7/day Slope = -d = -7/day Inventory decreases by 7/day after producing Slope = p-d = 13/day Inventory increases by 13 each day while producing Note: 1-(d/p) = fraction of production that goes into inventory

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12-8 Number of Production Runs per year = D Q D = Annual demand (relatively constant) = Annual demand (relatively constant) S = Setup cost per setup = Setup cost per setup H = Holding (carrying) cost per unit per year = Holding (carrying) cost per unit per year d = Demand rate (units per day, units per week, etc.) = Demand rate (units per day, units per week, etc.) p = Production rate (units per day, units per week, etc.) = Production rate (units per day, units per week, etc.) Determine: Q Determine: Q = Production run size (number of items per production run) = Production run size (number of items per production run) POQ Model Equations POQ Model Equations Setup Cost per year = S D Q Holding Cost per year = (average inventory level) × H Given
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