Determining Order Quantities and Inventory Levels The application of these

Determining order quantities and inventory levels the

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Determining Order Quantities and Inventory Levels The application of these models depends on whether the demand or usage of the inventory is dependent or independent. Dependent demand . The item is part of a larger component or product , and its use is dependent on the production schedule for the larger component . (a derived demand 内内内内 )
Independent demand. The usage of the inventory item is not driven by the production schedule . It is determined directly by customer orders, the arrival of which is independent of production scheduling decisions. Fixed-Quantity Models The objective of the model is to minimize the total annual costs . Perpetual inventory system 内内内内内 Event triggered: Initiates order when stock depleted to a specific level . Reorder point Inventory replaced in fixed amounts Economic order quantities Issues: visual signals, IT applications Safety Stock Safety stock is held because of uncertainty in supply and/or demand The trade-off is the cost of stocking out versus the cost of holding inventory Safety stock levels can be calculated using statistical techniques . e.g., Take into account standard deviation of demand fixed-period models In fixed-quantity models, orders are placed when the reorder point is reached, but in fixed-period models, orders are placed only at review time . The inventory level , therefore, must be adjusted to prevent stockouts during the review period and lead time . Inventory on-hand counted at specific time intervals and replenished to a desired level Only the passage of time triggers the model Which System is better? Fixed order quantity system Higher maintenance costs Every transaction logged Inventory controlled precisely Fixed time period
Minimal record keeping Higher average inventories to protect against stock-outs Higher stock-out rates Different order quantities for each cycle Ability to batch orders to suppliers 内内内内内内 supplier Probabilistic Models ( 综综 quantity and time) It is far more common to have some variability in demand, lead times, supply and so on. Models are more complex than the deterministic ones above, but the probabilistic approach gives more information on likely outcomes . The service coverage can be defined as the portion of user requests served. Service coverage also can be defined as the portion of demand serviced immediately. Setting service coverage requires managers to make explicit evaluations of these costs so that the appropriate balance between carrying and stockout can be achieved. The complexity of probabilistic models increases greatly when lead times, usable quantities received, inventory shrinkage rates, and so on, also vary under conditions of uncertainty, when nonnormal distributions are observed, and when the variations change with time. Simulation models and other more advanced statistical techniques can be used to solve these complex situations.

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