Balance holding cost against stock-outs with EOQ and just-in-time.
Inventory balances holding cost against ordering and shortage costs: EOQ=√(2DS/H), reorder point, safety stock for service level, ABC analysis, JIT, VMI. Minimising inventory frees capital but raises disruption risk. Bullwhip effect amplifies demand variation upstream.
With D=10 000/yr, S=$50, H=$2, EOQ=707 units.
Inventory control balances the cost of holding stock against the cost of running out, so it affects both working capital and service.
Balance holding cost against stock-outs with EOQ and just-in-time.
Inventory control balances the cost of holding stock against the cost of running out, so it affects both working capital and service.
The order size that minimises the sum of ordering cost and holding cost, found from the square root of two times demand times ordering cost over holding cost.
A method that delivers parts just when they are needed, which reduces stock but requires reliable suppliers and short lead times.
Typical applications include calculating the order quantity that minimises total ordering and holding cost, setting a safety stock level for a critical spare part and changing to just-in-time delivery from a nearby supplier.
Study "Production planning and scheduling" first (topic 38 of 102 in Manufacturing, Robotics & Systems). It covers the groundwork this topic builds on.
Cycle stock. Lead time demand. Service level z-factor.
With D=10 000/yr, S=$50, H=$2, EOQ=707 units.
The next topic is "Supply chain and logistics", which builds directly on this one.
It is classed as Intermediate in Manufacturing, Robotics & Systems (topic 39 of 102). It is an intermediate topic. Work through the beginner topics in Manufacturing, Robotics & Systems first.
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