EOQ and Fixed Time Period Models

Inventory management

Inventory control questions

• When to order ?

• How much to order ?

• When to supply ?

• How much to supply ?

Multi period Inventory Models

Fixed Order Quantity model (FOQ) - Q model

Place order when inventory reaches a specified level, called Reorder Level

Fixed Time Period Model (FTP) - P model

Place order at the end of a predetermined Time Period

Comparison of Q and P models

Inventory Cost

Inventory Cost

Q model, Assume order quantity is Q

The simplest EOQ model assumes:

• Constant and uniform Demand

• Constant Cost per unit

• Constant Holding Cost

• Constant Ordering Cost

• Constant Lead time (time between placing order and receiving goods - All demand is satisfied

EOQ model

Optimal order quantity

Reorder point calculation

Comparison of Q and p models