OM 300 1nd Edition Lecture 28 Outline of Last Lecture I EOQ Model II Minimizing Costs III Reorder Points Outline of Current Lecture I Production Order Quantity Model II Quantity Discount Model Current Lecture These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Other Probabilistic Models When data on demand during lead time is not available there are other models available 1 When demand is variable and lead time is constant 2 When lead time is variable and demand is constant 3 When both demand and lead time are variable Fixed Period P Systems Orders placed at the end of a fixed period Inventory counted only at end of period Order brings inventory up to target level o Only relevant costs are ordering and holding o Lead times are known and constant o Items are independent of one another Inventory is only counted at each review period May be scheduled at convenient times Appropriate in routine situations May result in stockouts between periods May require increase safety stock Continuous Review Models vs Periodic Review Models Continuous Periodic Order Quantity Q a constant amount each Order Quantity a variable amount each time time an order is placed an order is placed When to place order R when quantify on When to place order T when the review hand drops to the reorder level period arrives Recordkeeping inventory level is updated Recordkeeping inventory level is updated only whenever a withdrawal or addition is made at the end of the current review period Periodic Review Systems Advantages are o No need for a system to continuously monitor item o Items ordered from the same supplier can be reviewed on the same day saving purchase order costs Disadvantages o Replenishment quantities Q vary o Order quantities may not qualify for quantity discounts Sample Newsboy Problem available in PDF notes provided on Blackboard
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