Inventory model is a mathematical model that helps business in determining the optimum level of inventories that should be maintained in a production process, managing frequency of ordering, deciding on quality of goods or raw materials to be stored, tracking flow of supply of raw materials and goods provided.
The Star Equipment Company purchases 54,000 bearing assemblies each year at a unit cost of $40.00. The holding cost is $9.00 per unit per year, and the ordering cost is $20.00. (a) What is the economic order quantity? (b) How many orders should be placed per year? (c) If the lead time is one (01) month, what is the re-order point for the assemblies?
I'm really struggling with this for some reason. I'm trying to determine the max inventory, ROP, and Reorder qty. Can anyone help? What if I sold 1 unit per day, MOQ is 4, lead time = 14 days between orders and 10 days for it to arrive. I know the formulas, but I'm doing something wrong, because my reorder point and Max stock is looking about the same.
Thanks, but one question and remark: At time 11.19 you explained the EOQ formula using a simple example. The numbers are correct. But what confuses me are, that the dimensions/units do not match together (e.g. $ or units is a dimension): D is "units", S is $/order, and H is "$ per unit per year". If you calculate just the dimensions you do not get the desired result of "units per order" but something different. Can you help me here? In my calculation D should be "units per order" instead of just "units", so that the ending result is "units per order".
EOQ is not the best equation because it does not account for lead time. Not to mention it assumes that all variables are constant which we all know in the world of inventory management is far from the truth.
It does account for lead time Lu Bu, If you watched the video closely you would see under 'basic EOQ assumptions' that assumed 'lead time is known and constant', and that it is an 'assumption'. I believe it is a fair assumption. Eg, you are ordering from the same manufacturer a 'reasonably' consistent number of components on a regular basis, then you should have a built in 'emergency' inventory for A items (most profitable) that then takes into account the 'variables'. (that particular supplier running out of stock). Your statement 'assumes variables are constant' is oxymoronic, as anyone in the world of inventory management would know that if you had the perfect inventory formula you would be the one delivering this lecture....or sitting on a desert island with a 15yr old Scotch.....
How exactly did u get the annual ordering cost and ann holding cost in the quantity disount example at 36:30. I guess you are wrong, because you just came with demand 5000, we never saw the question then the annual holding and ordering totally confused me. Clarify please
He is not wrong: Total ordering costs=(D/Q*)K ; Holding costs=(Q/2)*h*c ; Product costs = cD So, for when Q*=1000 (2nd row) as an example: TC=(5000/1000)*49 + (1000/2)*(0.2*4.75) + (4.75*5000) = $24725 as shown. If you do that for the other quantities Q*=700 and Q*=2000, you will see they give the right value (of course you have to plug the corresponding product cost for each ocasion)
My professor in vietnam stole your slides to teach us. However, the way she explained things was horrible and confusing. She also speaks broken english which makes it 10 times more annoying for me.
Inventory model is a mathematical model that helps business in determining the optimum level of inventories that should be maintained in a production process, managing frequency of ordering, deciding on quality of goods or raw materials to be stored, tracking flow of supply of raw materials and goods provided.
Professor Harvey this video is super brilliant, easy to follow. Congrat!
EPQ was very nicely explained than any other book........
Especially that "Cookies" example........ thanks !!!
The Star Equipment Company purchases 54,000 bearing assemblies each year at a unit cost of $40.00. The holding cost is $9.00 per unit per year, and the ordering cost is $20.00.
(a) What is the economic order quantity?
(b) How many orders should be placed per year?
(c) If the lead time is one (01) month, what is the re-order point for the assemblies?
Thank you very much professor. It is very useful and friendly presentation
Your video was really helpful. Please make more video about inventory. Thanks.
thank you DR
it's really great effort
My Sanu is very smart, and I knew it. It's official that you are my O2.
Thank you! your class helped me
Thanks Professor, it is simple to follow.
Thank you, really good teaching!
Informative
this is very helpful, thank you..
Great lecture, watched on 1.25x
Interesting lecture!
Thank you sir well explain
you are an unbelievable man
am grateful for this lecture!
Thanks
Can you please turn on the closed captions
Thanks , well explained
Great work
thank u for such valied lecture
helpful
thanx Prof, much appreciated!
I'm really struggling with this for some reason. I'm trying to determine the max inventory, ROP, and Reorder qty. Can anyone help? What if I sold 1 unit per day, MOQ is 4, lead time = 14 days between orders and 10 days for it to arrive. I know the formulas, but I'm doing something wrong, because my reorder point and Max stock is looking about the same.
thank you
professor appointed must view video.
Greetings sir🙏🙏 what is percentage change in the EOQ when the demand is increased by 25%? Is there any formula to calculate this??
Excellent sir
th-cam.com/video/2ZL5eYZfgfk/w-d-xo.html
Thanks bro i was confused but u helped me out
15:08
thanx a lot sir
Thanks, it is well explained. Can you tell me what would be the simplest way to determine demand ? Cheers!
+Jeremy Ramadhi Irawan Easiest way is to do a forecast of demand
Thanks, but one question and remark:
At time 11.19 you explained the EOQ formula using a simple example. The numbers are correct. But what confuses me are, that the dimensions/units do not match together (e.g. $ or units is a dimension):
D is "units", S is $/order, and H is "$ per unit per year".
If you calculate just the dimensions you do not get the desired result of "units per order" but something different.
Can you help me here? In my calculation D should be "units per order" instead of just "units", so that the ending result is "units per order".
Have you touched on EPQ, Level and Chase strategies, or a combination of both?
Thank you :)
thanks alot
You state in the assumptions that "only variable cost are setup and holding costs"
This is incorrect as holding cost are assumed fixed. Right?
What about two bin inventory system?
the derivation of ordering cost in the production order quantity model is wrong .
Is total inventory cost and total cost calculation same?
Yes
EOQ is not the best equation because it does not account for lead time. Not to mention it assumes that all variables are constant which we all know in the world of inventory management is far from the truth.
It does account for lead time Lu Bu, If you watched the video closely you would see under
'basic EOQ assumptions' that assumed 'lead time is known and constant', and that it is an 'assumption'.
I believe it is a fair assumption. Eg, you are ordering from the same manufacturer a 'reasonably' consistent number of components on a regular basis, then you should have a built in 'emergency' inventory for A items (most profitable) that then takes into account the 'variables'. (that particular supplier running out of stock). Your statement 'assumes variables are constant' is oxymoronic, as anyone in the world of inventory management would know that if you had the perfect inventory formula you would be the one delivering this lecture....or sitting on a desert island with a 15yr old Scotch.....
How exactly did u get the annual ordering cost and ann holding cost in the quantity disount example at 36:30.
I guess you are wrong, because you just came with demand 5000, we never saw the question then the annual holding and ordering totally confused me.
Clarify please
He is not wrong: Total ordering costs=(D/Q*)K ; Holding costs=(Q/2)*h*c ; Product costs = cD
So, for when Q*=1000 (2nd row) as an example:
TC=(5000/1000)*49 + (1000/2)*(0.2*4.75) + (4.75*5000) = $24725 as shown.
If you do that for the other quantities Q*=700 and Q*=2000, you will see they give the right value (of course you have to plug the corresponding product cost for each ocasion)
lago aqui lago ai?
pdf
My professor in vietnam stole your slides to teach us. However, the way she explained things was horrible and confusing. She also speaks broken english which makes it 10 times more annoying for me.
Felt like u just read the slides .