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Comparison Between Inventory Management Models

The document compares the Economic Order Quantity (EOQ) model and the Economic Production Quantity (EPQ) model, highlighting their purposes, formulas, and assumptions. EOQ focuses on minimizing inventory costs by determining optimal order quantities, while EPQ addresses simultaneous production and usage. Both models share similar variables and reorder point calculations but differ in their application and cycle time considerations.

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9 views1 page

Comparison Between Inventory Management Models

The document compares the Economic Order Quantity (EOQ) model and the Economic Production Quantity (EPQ) model, highlighting their purposes, formulas, and assumptions. EOQ focuses on minimizing inventory costs by determining optimal order quantities, while EPQ addresses simultaneous production and usage. Both models share similar variables and reorder point calculations but differ in their application and cycle time considerations.

Uploaded by

demro channel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Aspect Economic Order Quantity (EOQ) Model Economic Production Quantity (EPQ) Model

Purpose Determines the optimal order quantity to minimize Determines the optimal production quantity when
total inventory costs. units are produced and used simultaneously.
Basic Formula

Variables in - D: Annual demand. - - S: Ordering cost per order.- D: Annual demand. - S: Setup cost.
- H: Holding cost per unit per year. - H: Holding cost. - p: Production rate. - u: Usage rate.
Formula
Reorder Point (ROP) ROP= d × LT ROP = d × LT
Where: d = D / Operating time (Similar to EOQ but considers production and usage rates).
Total Cost

Number of Orders/Cycles N = D/Q0 Number of production cycles: D / Qp


Time Between T= (Q0 / D) ×Operating time Cycle time: Qp / u
Orders/Cycles Run time: Qp / p
Assumptions 1. Demand is constant and known. 1. Demand is constant.
2. Lead time is constant. 2. Production rate (p) > Usage rate (u).
3. No quantity discounts. 3. Production and usage occur simultaneously.

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