Lecture 9 - using the following: A. Expected number of...

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When to Order (reorder points - ROPs) Models Objective: minimize the risk (probability) of stockouts 4 Determinants of the ROP 1. rate of demand 2. lead time 3. extent of demand and/or lead time variability 4. degree of stockout risk acceptable to management Basic Formula for Computing ROP A. Constant demand and constant lead time B. Variability is present in demand during lead time use this formula if an estimate of expected demand during lead time and its standard deviation are available use this formula when data on lead time and demand are not readily available
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Shortages and Service Levels The ROP computation does not reveal the expected amount of shortage for a given lead time service level Information on expected number of shortage per cycle, or per year can be determined
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Unformatted text preview: using the following: A. Expected number of units short per cycle, E( n ) B. Expected number of units short per year, E( N ) C. Annual Service Level Service Level for Single-period Mode l Used to handle ordering of perishables (fresh fruits, vegetables, seafood, flowers), and Items that have a limited useful life (newspaper, magazines) Analysis focuses on two costs: shortage and excess Problems: 2 ABC Inventory Classification 3 Basic EOQ 4 Basic EOQ 11 EOQ with Non-instantaneous Delivery 13 EOQ with Discount 28 EOQ, ROP, Shortages 33 EOQ for multiple products...
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Lecture 9 - using the following: A. Expected number of...

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