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 demand during lead timeDL(bar)
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
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)