# Operations Management Essay

Submitted By emana320
Words: 387
Pages: 2

November 8, 2012
Operations management notes

Ordering costs and holding costs
Lot size=Q (How much?)
When= P (How often?)

Two types of cost= holding cost+ordering cost

Types of inventory:
Cycle inventory
Safety shock inventory
Anticipation inventory (wont concentrate on this one)
Pipeline inventory

Cycle inventory is the average of what you started out with divided by 2
Formula for cycle inventory = Q+0/2= Q/2

Anicipation inventory- seasonal demand. Ex anticipate that skis sell in the winter s stock up before the season

Pipe line inventrory- inventory in transit- place order with suppliers and you receive it.
How long it takes to get the items into your stock is called LEAD TIME (L)

Average per period d (bar)

Safety stock inventory- extra stock

1. Economic Order Quanitity 2. Q system 3. P system

Ex on page 317
Dbar= 18
D= 18*52=936
S=\$45
H= .25(60)=\$15
Q= 390

Total cost= Holding cost+ordering cost
Holding cost= Q/2*H= 390/2*15= 2925
Ordering Cost=D/Q*S= 936/390*45=\$108 TOTAL= 3,033
Alternative lot size (468) do the same thing and the TOTAL comes out to \$3,600 so the alternative lot size is more expensive.

EOQ=Q*= square root of 2DS/H

2(936)45/15 all square root= 74.94~ 75

So 75 is the new lot size now you redo the problem with 75 A way to check ur work (ordering and holding cost should be the same under the EOQ model..if it’s a LITTLE different its ok)

TOTAL…