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Unformatted text preview: ally assume cost is proportional to number of
units of excess demand.
units The EOQ Model
Assumptions:
Assumptions:
1. Demand is fixed at λ units per unit time.
1.
units
2. Shortages are not allowed.
3. Orders are received instantaneously. (this will be
3.
relaxed later).
relaxed
4. Order quantity is fixed at Q per cycle. (can be proven
4.
per
optimal.)
optimal.)
5. Cost structure:
5.
a) Fixed and marginal order costs (K + cx)
cx
b) Holding cost at h per unit held per unit time.
b) 5 Inventory Levels for the EOQ
Inventory
Model
Model The EOQ Model
G (Q ) = Kλ
hQ
+ λc +
Q
2 The three terms composing G(Q) are annual setup cost,
The
annual purchase cost and annual holding cost
respectively.
respectively.
K: se...
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This document was uploaded on 03/23/2014.
 Spring '14

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