erp ch 11 book

capital costs

inventory investment (loan interest, opportunity cost)

supporting assets (material handling equipment, IT)

Storage space costs

owned or rented space

inventory risk costs

Obsolescence
damange
theft
relocation

Inventory service costs

insurance
property taxes

Single Period - Inventory Models

Used when we are making a one time purchase of an item

Fixed order quantity model - inventory models

Used when we want to maintain an item “in-stock,’ and when we resupply the item, a certain number of units must be ordered

Event triggered, running out of stock

also called the economic order quantity, EOQ, and q model

fixed time period model - inventory models

the item is ordered at certain intervals of time

time triggered, monthly sales call by sales reps

Also called the periodic system, periodic review system, fixed order interval system, p model

Holding (or carrying) costs - inventory costs

cost for storage, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital

setup(or production change) costs - inventory costs

cost for obtaining the necessary materials, arranging specific equipment setups, filling out the required papers and so on

ordering costs - inventory costs

costs of placing an order and associated with maintaining the syatem

shortage costs - inventory costs

cost of stock out

Independent demand

the demands for various items are unrelated to each other
-Examples: workstation may produce many parts that are unrelated but meet some external demand requirement

dependent demand

the need for any one item is a direct result of the need for some other item
- Usually a higher-level item of which it is part

EOQ formula is

sqrt(2DS/H)

safety stock

amount of inventory carried in addition to expected demand.

look over the old math problems