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Inventory Models: Single Quantity: 1.purchase Model Without Shortages

1. This document discusses various inventory models including single quantity models with and without shortages, manufacturing models with and without shortages, a lead time model, and a multiple model with order constraints. 2. The single quantity models describe how to calculate the optimal order quantity, number of orders, time between orders, costs including ordering, holding, shortage, and total inventory costs. 3. The manufacturing models are similar but also calculate production time, depletion time, and inventory levels. 4. The lead time model provides methods to calculate safety stock levels and reorder points when lead times are given. 5. The multiple model section shows how to adjust the order quantity if the number of orders is constrained.

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123 views6 pages

Inventory Models: Single Quantity: 1.purchase Model Without Shortages

1. This document discusses various inventory models including single quantity models with and without shortages, manufacturing models with and without shortages, a lead time model, and a multiple model with order constraints. 2. The single quantity models describe how to calculate the optimal order quantity, number of orders, time between orders, costs including ordering, holding, shortage, and total inventory costs. 3. The manufacturing models are similar but also calculate production time, depletion time, and inventory levels. 4. The lead time model provides methods to calculate safety stock levels and reorder points when lead times are given. 5. The multiple model section shows how to adjust the order quantity if the number of orders is constrained.

Uploaded by

munotmanas
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INVENTORY MODELS

SINGLE QUANTITY:
1.PURCHASE MODEL WITHOUT SHORTAGES
VALUES NEED TO BE ENTERED OR TO BE GIVEN D,Co,Ch,Ci
D is annual demand in units
Co is ordering cost per order in Rs.
Ch is holding cost per unit per year.
Ch value can be entered in 2 ways1.Direct value is given
2. some % of Ci (where Ci is cost per item.)
(Some % will be known)
What we need to find?
Q=Order quantity =sqrt((2*D*Co)/Ch) in units.
Maximum inventory =Q
N=D/Q=No. of orders
Time between orders=(Q/D) in years
(Q/D)*12 in months
(Q/D)*365 in days
Note: Options must be provided whether we need in years, months or days.
Ordering Cost= Co*(D/Q) in Rs.
Holding Cost= (Q/2)*Ch in Rs.
Item Cost=

Ci*D

in Rs.

Total Inventory Cost= Ordering Cost+ Holding cost+ Item cost


2.PURCHASE MODEL WITH SHORTAGES
VALUES NEED TO BE ENTERED OR TO BE GIVEN D,Co,Ch,Ci,Cs
D is annual demand in units
Co is ordering cost per order in Rs.
Ch is holding cost per unit per year in Rs.
Ch value can be entered in 2 ways1.Direct value is given
2. some % of Ci (where Ci is cost per item.)
(Some % will be known)
Cs is shortage cost per unit per year in Rs.

What we need to find?


Q=Order quantity =sqrt((2*D*Co)/Ch) * sqrt ((Ch+Cs)/Cs)in units.
S=Shortage Quantity=(Q*Ch)/(Ch+Cs) in units
Maximum Inventory=(Q-S)
N=D/Q=No. of orders
Time between orders,T=(Q/D) in years
(Q/D*12 in months
(Q/D)*365 in days
T1=Inventory Period= (Q-S)/D in years
(Q-S)/D*12 in months
(Q-S)/D)*365 in days
T2=Shortage Period = (S/D) in years
(S/D)*12 in months
(S/D)*365 in days
Note: Options must be provided whether we need in years, months or days.
Ordering Cost= Co*(D/Q) in Rs
Holding Cost= [(Q-S)^2 )/(2*Q)] * Ch in Rs.
Shortage Cost = [(S^2)/(2*Q)]*Cs in Rs.
Item Cost=

Ci*D

in Rs.

Total Inventory Cost= Ordering Cost+ Holding cost+ Shortage cost+ Item cost
3.MANUFACTURING MODEL WITHOUT SHORTAGES
First condition for solving manufacturing model problems Production
rate>Demand rate(P>D)
VALUES NEED TO BE ENTERED OR TO BE GIVEN D,P,Co,Ch,Ci
D is annual demand in units
Co is set up cost per setup in Rs.
Ch is holding cost per unit per year.
Ch value can be entered in 2 ways1.Direct value is given
2. some % of Ci (where Ci is cost per item.)
(Some % will be known)

What we need to find?


Q=Order quantity =sqrt((2*D*Co)/Ch) * sqrt(P/(P-D)) in units.
Maximum inventory =(P-D)/P *Q in units
N=D/Q=No. of orders
Time between orders,T=(Q/D) in years
(Q/D*12 in months
(Q/D)*365 in days
T1=Production time= Q/P in years
Q/P*12 in months
Q/P*365 in days
T2=T-T1=Depletion time
Note: Options must be provided whether we need in years, months or days.
Ordering Cost= Co*(D/Q) in Rs.
Holding Cost= (Q/2)* (P-D)/P * Ch in Rs.
Item Cost=

Ci*D

in Rs.

Total Inventory Cost= Ordering Cost+ Holding cost+ Item cost


4.MANUFACTURING MODEL WITH SHORTAGES
First condition for solving manufacturing model problems Production
rate>Demand rate(P>D)
VALUES NEED TO BE ENTERED OR TO BE GIVEN D,Co,Ch,Ci,Cs
D is annual demand in units
Co is setupcost per setup in Rs.
Ch is holding cost per unit per year in Rs.
Ch value can be entered in 2 ways1.Direct value is given
2. some % of Ci (where Ci is cost per item.)
(Some % will be known)
Cs is shortage cost per unit per year in Rs.
What we need to find?
Q=Order quantity =sqrt((2*D*Co)/Ch) * sqrt ((Ch+Cs)/Cs) * sqrt(P/(P-D)) in units.
S=Shortage Quantity=Q* ((P-D)/P) * Ch/(Ch+Cs) in units
Maximum Inventory, Imax=(Q*((P-D)/P))-S

N=D/Q=No. of orders
Time between orders,T=(Q/D) in years
(Q/D*12 in months
(Q/D)*365 in days
T1 =

S/(P-D) in years
S/(P-D) *12 in months
S/(P-D) *365 in days

T2 =

(Imax/P-D) in years
(Imax/P-D)*12 in months
(Imax/P-D)*365 in days

T3 =

(Imax)/D in years
(Imax)/D*12 in months
(Imax)/D*365 in days

T4 =

S/D in years
S/D*12 in months
S/D*365 in days

Note: Options must be provided whether we need in years, months or days.


Inventory period= T2+ T3
Production period=T2+T1
Shortage Period=T4+T1
Ordering Cost= Co*(D/Q) in Rs
Holding Cost=[Q*(1-(D/P))-S]^2 *(1/(2*Q*(1-(D/P)))) * Ch in Rs.
Shortage Cost =(S^2 *Cs)/(2*Q*(1-(D/P))) in Rs.
Item Cost=

Ci*D

in Rs.

Total Inventory Cost= Ordering Cost+ Holding cost+ Shortage cost+ Item cost

5.LEAD TIME MODEL

VALUES NEED TO BE ENTERED OR TO BE GIVEN D,Co,Ch, Ci,Lead time,Safety


Stock
D is annual demand in units
Co is ordering cost per order in Rs.
Ch is holding cost per unit per year.
Ch value can be entered in 2 ways1.Direct value is given
2. some % of Ci (where Ci is cost per item.)
(Some % will be known)
Safety stock in units
Lead time in months,days or weeks.
What we need to find?
Q=Order quantity =sqrt((2*D*Co)/Ch) in units.
N=D/Q=No. of orders
Lead time demand= Lead time * Demand
Reorder Level= Safety stock + Lead time Demand
IF SAFETY STOCK IS NOT GIVEN
1.SAFETY STOCK= Maximum Lead time demand Average Lead time Demand
Note: both maximum lead time demand and average lead time demand are already
known)
2.SAFETY STOCK= Z *(STD.DEVIATION OF DAILY DEMAND)*sqrt(Lead time)
Z=service factor =1.65
STD.DEVIATION OF DAILY DEMAND
Lead time
All the above 3 values will be in the question.

2.MULTIPLE MODEL
1.ORDER CONSTRAINT
VALUES NEED TO BE ENTERED OR TO BE GIVEN D,Co,Ch, Ci
D is annual demand in units

Co is ordering cost per order in Rs.


Ch is holding cost per unit per year.
Ch value can be entered in 2 ways1.Direct value is given
2. some % of Ci (where Ci is cost per item.)
(Some % will be known)
What we need to do If N is reduced what would be the impact on new order size.
Q=Order quantity =sqrt((2*D*Co)/Ch) in units.
N=No. of orders=Dj/Qj
Substitute New N# in lambda
lambda= [i*(sqrt(Dj*Cj)^2)/(2*N#^2)] - Co
New Q*=Order quantity =sqrt(2*Dj*(lambda+Co)/(i*Cj)) in units.

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