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4QA3 F12 Week 8 Lecture Notes

Excess demand is backordered costs o k fixed ordering

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Unformatted text preview: dering cost, o  h: Holding cost per unit held per period, o  p: Penalty cost per unit of unsatisSied demand. 4QA3 F12 A. Gandomi 7 ●  Decision variables are: o  Q: the lot size (order quantity), o  R: the reorder point in terms of the inventory position. ●  on- hand inventory + on- order inventory Source: Nahmias (2009) Here, Q and R are independent decision variables. Essentially, R is chosen to protect against uncertainty of demand during the lead time, and Q is chosen to balance the holding and set- up costs. 4QA3 F12 A. Gandomi 8 ●  Here, the response time of the system is the order lead time. ●  Hence, the uncertainty that must be protected against is the uncertainty of demand during the lead time. ●  We assume that D represents the demand during the lead time and has cumulative distribution function F(x). 4QA3...
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