Working Days = 288/year 9600 units are required for 288 days. The best strategy is to order 300, not 100, not 9,600, 300. That is what minimizes our overall cost: both carrying 300 units are enough for how many days? cost and ordering cost. As we said we include purchasing don’t cost because purchasing cost plays no role in this model (300/9600) × (288) = 9 days because price remains the same regardless of quantity. What is the Optimal Total Cost? How Many Times Should We Order? You can go through other different ways to come up with the same 9 days. What is the optimal total cost? Annual demand for a product is 9600 units. D = 9600 The total cost of any policy is computed as: TC = (Q/2)H + (D/Q)S Economic Order Quantity is 300 units. EOQ = 300 The economic quantity is 300. TC = (300/2)16 + (9600/300)75 Each time we order EOQ. TC = 2400 + 2400 How many times should we order per year? TC = 4800 D/EOQ : 9600/300 = 32 What is the Length of an Order Cycle? Example 3.
The best strategy is to order 300, not 100, not 9,600, 300. That is what minimizes our overall cost: both carrying cost and ordering cost. As we said we don’t include purchasing cost because purchasing cost plays no role in this model because price remains the same regardless of quantity. How Many Times Should We Order? Annual demand for a product is 9600 units. D = 9600 Economic Order Quantity is 300 units. EOQ = 300 Each time we order EOQ. How many times should we order per year? D/EOQ 9600/300 = 32 What is the Length of an Order Cycle? Working Days = 288/year 9600 units are required for 288 days. 300 units are enough for how many days? (300/9600) × (288) = 9 days What is the Optimal Total Cost? You can go through other different ways to come up with the same 9 days. What is the optimal total cost? The total cost of any policy is computed as: TC = (Q/2)H + (D/Q)S The economic quantity is 300. TC = (300/2)16 + (9600/300)75 TC = 2400 + 2400 TC = 4800 : Example 3.
6.InventoryBasicFinalPepperdine.docx