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FIU EIN 5346 - EOQ Notes & Some Extensions

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Assumptions: Basic EOQ ModelManaging Multiple LocationsManaging Multiple LocationsManaging Multiple LocationsManaging Multiple LocationsManaging Inventory Turn RatesManaging Multiple ItemsInventory Management IIIEOQ Notes & Some ExtensionsCapliceLecture 6ESD.260 Fall 2003© Chris Caplice, MIT2MIT Center for Transportation & Logistics – ESD.260Assumptions: Basic EOQ ModelDemand Constant vs Variable Known vs Random Continuous vs Discrete Lead time Instantaneous Constant or Variable (deterministic/stochastic)Dependence of items Independent Correlated IndenturedReview Time Continuous vs PeriodicNumber of Echelons One vs ManyCapacity / Resources Unlimited vs LimitedDiscounts None All Units or IncrementalExcess Demand None All orders are backordered Lost orders SubstitutionPerishability None Uniform with timePlanning Horizon Single Period Finite Period InfiniteNumber of Items One Many© Chris Caplice, MIT3MIT Center for Transportation & Logistics – ESD.260Managing Multiple LocationsnDdd Diin=1i =∑= ;CCCd2 = q CCDC2 = Qphoii*pho*;Qq*i*n1i=n = ∑© Chris Caplice, MIT4MIT Center for Transportation & Logistics – ESD.260Managing Multiple Locations]QTC[n =] qTC[*i*n=1i∑NM = NTCMTC = qqi*N1=ii*M1=i][*][*∑∑© Chris Caplice, MIT5MIT Center for Transportation & Logistics – ESD.260Managing Multiple LocationsPolicy EOQ Locations 1 N Lot Size Q q Avg Inv Q/2 √N[Q/2] Order Cost OQ1 √N[OQ1] Holding Cost HQ1 √N[HQ1] Total Cost OQ1+HQ1 √N[OQ1+HQ1]© Chris Caplice, MIT6MIT Center for Transportation & Logistics – ESD.260Managing Multiple LocationsPolicy Fixed Order Size Days of Supply Locations 1 N 1 N Lot Size T T M m Avg Inv T/2 N[T/2] M/2 M/2 Order Cost OT1 OT1 OM1 NOM1 Holding Cost HT1 NHT1 HM1 HM1 Total Cost OT1+HT1 OT1+NHT1 OM1+HM1NOM1+HM1© Chris Caplice, MIT7MIT Center for Transportation & Logistics – ESD.260Inventory TurnoverMedian Turns per YearSource: OSU Survey of Career Patterns in Logistics0.00X5.00X10.00X15.00X20.00X25.00X1994 1996 1998 2000YearPlant InventoryField Inventory3rd Party Whse© Chris Caplice, MIT8MIT Center for Transportation & Logistics – ESD.260Managing Inventory Turn Rates2DTurnover TOQ== []1*[]12*NipiiSYSTEMNipiiDCTOQC===∑∑22**hpoDC CDTOQC==© Chris Caplice, MIT9MIT Center for Transportation & Logistics – ESD.260Managing Multiple


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FIU EIN 5346 - EOQ Notes & Some Extensions

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