Instructor:
Cecil Bozarth , PhD
North Carolina State University
Author of "Introduction to Operations and Supply Chain Management," 2nd edition, Pearson, Prentice-Hall
SECTION Index
Functions and Drivers of Inventory
Independent vs. Dependent Demand Inventory Systems
Two Classic Independent Demand Systems
EOQ, Reorder Point, and Safety Stock Analysis
1. EOQ Model
Related
SITE LINKS
Inventory Management Models : A Tutorial
PERPETUAL SYSTEM
The two classic systems for managing independent demand inventory are periodic review and perpetual review systems. This section focuses on the Perpetual System.
What is the "Best" Order Size Q?
What is a Perpetual System?
Inventory level is constantly monitored and a new order place when a pre-established reorder point R is met
Q and Average Inventory Level
As the order quantity doubles so does average inventory (= Q/2)
What is the "Best" Order Size Q?
- Inventory related costs
- Order preparation costs / setup costs
- Inventory carrying costs
- Shortage & customer service costs
- Other considerations
- Out of pocket or opportunity cost?
- Fixed, variable, or some mix of the two?