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costs, receiving costs, administrative expenses; number of orders X – cost/orderHolding Cost–how much you want to keep on-hand; warehouse handling/rents; capital investment; amount of inventory X – holding cost/unit/year INVENTORY MODELS:MULTI PERIOD (EOQ, ROP, MRP & SSTK )Economic Order QTY (EOQ): determines best, optimal QTY in multi period ordering Annual holding costs = (Avg. # of units in inventory)(Hold cost per unit per year) Avg. # of units in inv. = Q/2; Q = order size, units; H = hold cost/unit/year Annual Hold costs = HQ/2Annual ordering costs = (# of orders placed per year)(cost per order) # of orders placed per year = Annual Demand/Order Size (D/Q); S = cost per orderannual ordering cost = DS/Qtotal inventory costs = holding costs + ordering costs√Re-order Point (ROP)-constant demand and lead time = D (same daily units as LT) x LT + SafetyS (Zσ)Uses safety stock (excess for variable D rate; ROP = average demand during lead time x SS-Total Inventory Cost = Ordering Costs + Holding Costs-Without Safety Stock:oTotal Inventory Cost = Ordering Costs + Holding CostsoTotal Inventory Cost = (D/Q)*S + (Q/2)*H-Including Safety Stock:oTotal Inventory Cost = Ordering Costs + Holding CostsoTotal Inventory Cost = (D/Q)*S + (Q/2 + SS)*HPRODUCTION PLANNING AND CONTROL SYSTEMS:Materials Requirements Planning (MRP)-determines # of parts, components & materials to produce products also helps with scheduling info – supports D/forecasts for end item – driven by dependent DBills of Materials (BOM)-complete product description of materials, parts, components, and relationships between parts & assemblies; product structure or tree; depicts relationship between )-incorporates non- manufacturing functions; integrates all components of business model; organized around business processesvaluable/critical items; managed by individuals B-mass produced items (valuable together) Consumables like bolts, lubricants, bulk purchasesINVENTORY MODELS: SINGLE PERIOD (news)Demand is uncertain; normal distribution of DTwo major costs: Excess (overage) costs: cost of excess stock: price at which the product was bought, adjustedfor “salvage” value (Ce) = inventory cost – salvage value(what other is willing to pay back);Ce = cost per unit – salvage value per unit Shortage (underage) costs: lost profit (P-C) + anygood will lost; Cs= Selling price – inventory cost; Cs = revenue – costwant excess cost = shortage costimpact of increasing stock level by one