Inventory management: Economic order quantity model (EOQ)

My apology, there is a mistake in the average amount of inventory on hand equation, it should be (Q+0)/2 not (Q-0)/2.
Effective inventory management is essential for most businesses' successful operations and supply chains. This is because inventory management impacts operations, marketing, and finance. Poor inventory management hampers operations diminish customer satisfaction, and increases operating costs.
Here we will learn the inventory ordering policies.
Inventory ordering policies address the two basic issues of inventory management: how much to order and when to order.
A number of models are described that are used for these issues.
Inventory that is intended to meet expected demand is known as cycle stock, while inventory that is held to reduce the probability of experiencing a stockout (i.e., running out of stock) due to demand and/or lead time variability is known as safety stock.
The discussion begins with the issue of how much to order.
The question of how much to order can be determined using an economic order quantity (or EOQ) model. E O Q models identify the optimal order quantity by minimizing the sum of certain annual costs that vary with order size and order frequency. Three order size models are described here:
The basic economic order quantity model.
The economic production quantity model.
The quantity discount model.
The basic economic order quantity model (EOQ model) is explained by solving an example and a problem

[@AlJazariedu]

My apology, there is a mistake in the average amount of inventory on hand equation, it should be (Q+0)/2 not (Q-0)/2.

[@AlJazariedu]

@@bellalhossainrifat4388 Thanks for your feedback, I will consider this later.

[@shreyapaul5188]

Can you please explain why you took Average amount of inventory in hand as
(Q-0)/2. What is 2 and 0 here?

[@AlJazariedu]

@shreyapaul5188
Thanks of your comment.
Actually the average inventory should be (Q+0)/2, as the average inventory equals the average of the inventory on hand at the beginning of the cycle and the inventory at the end of cycle. And we know the at the beginning of the cycle the on hand inventory is Q and it is 0 at the end of the cycle.

[@othicamvan223]

Can you please help me distinguish the economic order quantity per order and the optimal number of orders per year, do the economic order quantity per order and the optimal number of orders per year have the same meaning? I have exercises about them but still not so sure

[@AlJazariedu]

@othicamvan223
Thanks for your question.
The economic order quantity is the number of items per order that give the minimum annual inventory cost and can be calculated from the equation "or Q0 equals the square root of 2 multiplied by D multiplied by S divided by H". while the number of economic orders in a year means how many economic quantities must be ordered per year. In the first example of this video, the yearly demand is 9,600 tires, and the calculated
economic order quantity is 300 tires. This means that each order has to be with 300 tires. To obtain the number of economic orders per year, simply divide the total yearly requirement (9,600) by the quantity per order (300) the result is 32 orders per year.
Hope it is clear now, if not contact me again.

[@othicamvan223]

@@AlJazariedu I got it, thank you

[@AlJazariedu]

@@othicamvan223 you welcome

[@AlJazariedu]

@@othicamvan223
Hope you get to benefit from my video.
Would you please support the channel with your subscription and share the channel link with your colleagues.

[@palmianodaniV]

The answer of 2x9600×75 and divide to 16, is 90,000? Why its 300 tires. Huhu

[@AlJazariedu]

It square root of 90,000 equals 300 tires.

[@FrostDirt]

Thanks

[@AlJazariedu]

You welcome

[@topsyturvyy4558]

Great tutorials, thank you! 😃

[@AlJazariedu]

Thanks for watching!

[@syedfarashaider6745]

dayumm

[@AlJazariedu]

Thank you

[@vexanalayon7733]

Thank you for this vids , i survived in my pqt subject 😭😭

[@AlJazariedu]

Well, well, happy to hear this. Share the video with your colleagues.

[@minhngoc3548]

Can i caculate the ordering cost per order or just estimate it?

[@AlJazariedu]

@minhngoc3548
It is estimated taking into account the paperwork, administration, inspection, and receiving costs.

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[@AlJazariedu]

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[@rajeswarsingh256]

The original video he just copied. th-cam.com/video/KiCFfD5zBWQ/w-d-xo.html

[@AlJazariedu]

I am so sorry to hear this from you.
My video is published first. And we used the same reference.

[@rajeswarsingh256]

@@AlJazariedu :-) He is Professor Brent, at State University in California and world famous in ops.

[@AlJazariedu]

@@rajeswarsingh256 All respect to Prof. Brent,
You should have checked carefully before pressing charges and do not interfere with what does not concern you.