Professional Documents
Culture Documents
Karim Kobeissi
Chapter 8: Inventory
Management
Inventory - Definition
Any stored resource used to
satisfy a current or future need
(raw materials, work-in-process,
finished goods, etc.).
dealing
with
including
manufacturers,
physical
products,
wholesalers,
and
retailers.
Inventories of Raw
Materials
- Manufacturers
Inventories of Goods
- Wholesalers and Retailers
Customers
companies),
inventory
obsolescence.
Higher Profit
management,
T : Trillion
Benefits of Inventory
Hedge against uncertain demand
Hedge against uncertain supply
Economize on ordering costs
Smoothing
2.
3.
4.
5.
21
6
Variable Inventory
Cost per
C o m p o n e n t s o f t h e To t a l Va r i a b l e
Inventory Cost
Annual setup cost = (Number of orders per year) x (Ordering cost per order)
= (D/Q) x Co
Annual holding cost = (Average inventory) x (Holding cost per unit per year)
= (Q/2) x Ch
= To t a l Va r i a b l e I n v e n t o r y C o s t p e r Ye a r
Note:
( 2 DCo / Ch )
Q*
Where,
D = Annual demand
Co = Ordering cost per order
Ch = Holding cost per unit per year
Q* =
200 units.
( 2 DCo / Ch )
- In order to minimize
when
the
inventory
can
be
perspective.
The
most
important
Under
these
assumptions,
the
Inventorylevel
has
the
beside.
QS
appearance
Now
the
QS
Q
S
S
Time
TVC = $1,928.
The value of S* also leads to identifying the reorder point for this inventory policy.