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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