Scribd
Upload
21 views18 pages

Group 1 1

Uploaded by

airabernabeee101
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
21 views18 pages

Group 1 1

Uploaded by

airabernabeee101
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 18

INVENTORY

MODELS
ENGINEERING MANAGEMENT
GROUP 1

BERNABE, AIRA JANE G. BALASTA, KRESTIEL OSERRAOS, JOHN MARK L.


INVENTORY MODELS
It is the method of ensuring
that the right quantity of
the relevant stock is
available at the right time
and at the right place.
ECONOMIC ORDER BACKORDER
QUANTITY MODEL INVENTORY MODEL

TYPES OF
INVENTORY
MODELS
PRODUCTION ORDER QUANTITY
QUANTITY MODEL DISCOUNT MODEL
ECONOMIC ORDER
QUANTITY MODEL
It is used to calculate the
number of items that should
be ordered at one time to
minimize the total yearly costs
of placing orders and carrying
the items in inventory.
ECONOMIC ORDER QUANTITY
MODEL FORMULA :
EOQ = √(2DS / H)
Where:
D=Actual Demand
S=Ordering Cost Per Order
H=Holding cost per unit per
year
SAMPLE PROBLEM:
Given:
D= 10,000
S= 50
Consider a company that
H= 5
manufactures widgets. The
Sol.
annual demand for widgets
Using the formula
is 10,000 units, the ordering
EOQ = √(2DS / H)
cost per order is $50, and
the holding cost per unit per
EOQ = √[2(10000)(50)/5]
year is $5. EOQ = 200 units
PRODUCTION ORDER
QUANTITY MODEL
The economic order
quantity technique applied
to production order.
PRODUCTION ORDER
QUANTITY MODEL FORMULA:
POQ= √[2DS / H(1-(d/P))]

Where:
D: Annual demand
S: Setup cost per production run
H: Holding cost per unit per year
P: Production rate (units per year)
d: Demand rate (units per year)
Given:
SAMPLE PROBLEM: D= 5000
S= 100
Imagine a factory producing H= 2
custom-designed circuit boards. P= 10000
d= 5000
The annual demand for these
boards is 5,000 units, the setup Sol.
cost per production run is $100, Using the Formula given,
POQ= √[2DS / H(1-(d/P))]
the holding cost per unit per year POQ= √[2(5000)(100)/2(1-(5000/10000))]
is $2, the production rate is POQ= 1000 unit
10,000 units per year, and the
demand rate is 5,000 units per
year.
BACK ORDER
INVENTORY MODEL
Manages inventory shortages by
forecasting demand, tracking unfulfilled
orders, and determining optimal reorder
quantities. It ensures timely availability of
materials, helping to minimize project
delays and improve resource allocation
and cost management.
ECONOMIC ORDER
Back QUANTITY
order
MODEL FORMULA model
Inventory :
Basic formula:
Basic formulaBQ=DL​
− IA− IA​
= BQ=DL​

Where:
Where :
​ BQ = Back Order Quantity
BQDL​== Back Order
Demand Quantity
during Lead Time
DLIA​== Demand
Availableduring Lead Time
Inventory
IA​ = Available Inventory
ECONOMIC ORDER QUANTITY
MODEL FORMULA
With Safety Stock:
:
BQ=(ED​+ SS)−IA​

Basic formula = BQ=DL​− IA​


Where :

Where :
BQ = Back Order Quantity
BQ =ED​Back Order Quantity
= Expected Demand
DL​ = SS
Demand during
= Safety Stock Lead Time
IA​ = Available Inventory
IA​ = Available Inventory
Given:

SAMPLE PROBLEM:
Expected Demand (EDE_DED​) = 1,000 units
Demand during Lead Time (DLD_LDL​) = 500 units
Available Inventory (IAI_AIA​) = 300 units
Safety Stock (SSSSSS) = 200 units
A manufacturing company expects a
demand of 1,000 units of a product
over the next month. The lead time for Sol.
receiving new inventory is 2 weeks, and Using the Formula given,
BQ=(ED​+ SS)−IA​
the company anticipates that they will BQ=(1,000+200)−300
sell 500 units during this lead time. BQ=1,200−300=900
Currently, they have 300 units in
available inventory. They also keep a The back order quantity is 900 units. This means
the company will have 900 units on back order to
safety stock of 200 units to handle fulfill future demand after considering available
fluctuations in demand. inventory and safety stock.
QUANTITY
DISCOUNT MODEL
It is used to minimize the
total cost when quantity
discounts are offered by
the supplier.
QUANTITY
DISCOUNT MODEL
Formula:
TC(Q)=C(Q)+D⋅P(Q)+S
Where:
TC(Q) = Total Cost for quantity Q
C(Q)= Cost of purchasing Q units (can include
discounts)
D = Demand rate (units per time period)
P(Q) = Price per unit based on quantity
ordered
S = Ordering costs (fixed cost per order)
Solving

SAMPLE PROBLEM: Option 1: Order 49 units


TC(49)=(49×10)+(12049)×50≈612.45
Problem:
Option 2: Order 99 units
A company buys widgets priced at $10
TC(99)=(99×9)+(12099)×50≈951.61
each. The supplier offers discounts:
1-49 units: $10 each
Option 3: Order 120 units
50-99 units: $9 each TC(120)=(120×8)+50=1,010
100+ units: $8 each
The company demands 120 units per
month and incurs a $50 ordering cost. Conclusion:
The lowest total cost is $612.45 by ordering
49 units.
THANK
YOU VERY
MUCH!

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy