Module 6- Inventory Management - Copy.pptx
Module 6- Inventory Management - Copy.pptx
MANAGEMENT
Module 6
Required:
a. Determine the optimal order quantity (EOQ)
b. How many and how often orders should be
placed within a year?
c. Determine the average inventory in units
d. Determine the annual inventory carrying
costs
e. Determine the annual inventory ordering
costs
Assumptions of the EOQ Model
Reorder
2. When to make an order? Point
• Stockout Costs (SC)
opportunity costs and other costs incurred when inventory units run
out-of-stock (e.g., lost contribution margin on sales).
Lead Time- is period from the time an order is placed until such time the
same order is received.
Normal/Average lead time - this refers to the usual delay in the receipt of
ordered goods
Required:
a. Safety (buffer) stock
b. Reorder point
Example:
Each stock-out of a product sold by Park Seo
Joon Company costs P 2,000 per occurrence.
The carrying cost per unit of inventory is P 5
per year and the company orders 18 times a
year at a cost of P 200 per order. The
probability of a stock-out at various levels of
safety stock is: