6 one time delivery one time delivery assumptions

Info icon This preview shows pages 42–54. Sign up to view the full content.

View Full Document Right Arrow Icon
6. One Time delivery. One Time delivery. Assumptions Assumptions
Image of page 42

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Fixed Order Quantity System with Gradual Replenishment The inventory behavior is:
Image of page 43
Fixed Order Quantity System with Gradual Replenishment EPQ= economic production quantity = Where D= annual demand (expressed in units/ year) S= ordering cost (expressed as $ per order) C= item cost (expressed in $ per unit) F= inventory holding cost fraction (expressed as a fraction of item cost per year) P= production rate (expressed in units per period) d= usage rate (expressed in units per period) TC = [D*C] + ( )*S + ( )*H*( ) 2*D*S H P P-d D Q Q 2 P-d P
Image of page 44

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Special Inventory Models Special Inventory Models Production Production and demand and demand Demand only only TBO TBO Production quantity Production quantity Demand during Demand during production interval production interval Maximum inventory Maximum inventory On-hand inventory On-hand inventory Q Time Time I max p d Figure E.1 Figure E.1 I max = ( p d ) = Q ( ) Q p p d p
Image of page 45
See Example on Your Supplement P. 15-17.
Image of page 46

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Example of Determining Economic Production Quantity A manufacturer of steel products uses a large, special bolt as a fastener in all products in a particular product line. The usage rate of this item is 2000 per day. There are 250 working days in the year. It takes 30 minutes to prepare a manufacturing order for this bolt. The clerks make $5.00 per hour. It takes one hour to change the tooling to begin a production run for the bolt. The setup personnel make $9.00 per hour. The production run is 5000 units per day. C=1.30; F=25%; H=(1.3x25%)=0.325; d= 2,000; D=2,000x250=500,000 Problem: What is the economic production quantity for this item assuming a manufacturing cost of $1.30 and an annual holding cost of 25% of the manufacturing cost? S: (0.5x5) + (1x9)= $11.50, P=5,000 EPQ= (2.D.S)x P/H.(P-d) = √(2x500,000x11.50)x5,000/0.325X(5,000-2,000) ≈7,680
Image of page 47
Problem: If lead time is 1.5 days, what is the reorder point? Solution: L= 1.5; SS=0 R = d.L +SS = 2,000X1.5+0 = 3,000
Image of page 48

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Periodic Systems
Image of page 49
Periodic Systems T= economic order interval = L= reorder lead time (expressed as a fraction of a year) S= ordering cost (expressed as a fraction of a year) D= annual demand (expressed in units/year) C= item cost (expressed in $ per unit) F= inventory holding cost fraction (expressed as a fraction of item cost per year) Order quantity = Q= d(L+T) + SS – I t = M- I t (M= (Base-Level) = d(L+T) + SS I t = [On-Hand] + [On-Order] – [Back Order])
Image of page 50

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
See Example on Your Supplement P. 15-19.
Image of page 51
Example of Determining Economic Order Interval An auto parts store carrier a universal gasoline filter. The store sells 4000 units of this item annually. The cost of this filter from the supply house is $0.50 and the annual holding cost is 20% of the unit value. The cost of preparing a purchase order is $8.00. D=4,000; C=0.5; F=20%; H=0.5X0.2=0.1 Problem: If the store is open 51 weeks per year, how many weeks should there be between orders? S=$8.00 T= √2.S/H.D = √2x8/0.1x4,000 =0.2 (Years) x 51 =10.2 (Weeks)
Image of page 52

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Problems: If the lead time is one week, what is the quantity to be ordered if 110 units are currently on hand at the end of a reorder interval?
Image of page 53
Image of page 54
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern