Chpt07 - 1 7 Inventory Decision Making Fundamental...

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    1 7 Inventory Decision Making
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    Fundamental Approaches To  Managing Inventory Basic issues in inventory management How much and when to reorder Balancing cost with service Balancing product availability or customer service  and costs associated with it Identify the total logistics solutions that lead to  increases in customer service levels and reductions  in total logistics cost Different approaches to managing inventory Dependent Vs. Independent demand Pull Vs. Push Systemwide Vs. Single-facility solution
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    Fixed Order Quantity Approach (Condition of Certainty) Ordering a fixed amount of product each time  reordering takes place Order quantity depends on the product cost,  demand characteristics, and relevant inventory  carrying and reordering costs Firms need to develop  reorder point  (minimum  stock level to determine when to reorder the  fixed amount) and the  fixed order quantity  (also  called as the  economic order quantity, EOQ ) If lead time is 14 days and daily demand is 10 units,  then the reorder point will be 140 units What is your reorder point for gas purchase?
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    Demand is 20 units per day and lead time  is 10 days 200 400 0 Days 10 20 30 40 50 60 Inventory Order placed Order arrival Order placed Average cycle inventory . Order quantity of 400 units Order arrival Fixed Order Quantity Model under  the Condition of Certainty
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    Economic Order Quantity  Model EOQ is a concept that determines the optimal  order quantity on the basis of  ordering and  inventory carrying costs Assuming constant demand of 20 units per day and 10  days lead time Should we place orders for 200, 400, or 600 units? What is the impact on inventory if orders are placed at 
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This note was uploaded on 04/09/2008 for the course TRAN 431 taught by Professor Dr.cho during the Spring '08 term at N.C. A&T.

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Chpt07 - 1 7 Inventory Decision Making Fundamental...

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