In this chapter, the following content will be discussed: Compute three measures of forecast accuracy, develop seasonal indexes, conduct a regression and correlation analysis, use a tracking signal.
LECTURE 18 LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF Summary of last Session ỵ ỵ Global Company Profile: Amazon.com Functions of Inventory ỵ ỵ Types of Inventory Inventory Management þ þ þ þ ABC Analysis Record Accuracy Cycle Counting Control of Service Inventories ỵ Summary of last Session (Contd.) Inventory Models ỵ ỵ Independent vs Dependent Demand Holding, Ordering, and Setup Costs Agenda for this Session ỵ Inventory Models for Independent Demand ỵ ỵ ỵ ỵ ỵ The Basic Economic Order Quantity (EOQ) Model Minimizing Costs Reorder Points Production Order Quantity Model Quantity Discount Models Agenda for this Session (Contd.) ỵ Probabilistic Models and Safety Stock þ þ Other Probabilistic Models Fixed-Period (P) Systems Inventory Models for Independent Demand Need to determine when and how much to order ỵ ỵ ỵ Basic economic order quantity Production order quantity Quantity discount model The EOQ Model Annual setup cost = Q Q* D S H = Number of pieces per order = Optimal number of pieces per order (EOQ) = Annual demand in units for the inventory item = Setup or ordering cost for each order = Holding or carrying cost per unit per year Annual setup cost = = = (Number of orders placed per year) x (Setup or order cost per order) Annual demand Number of units in each order D Q Setup or order cost per order (S) D S Q The EOQ Model Annual setup cost = Q Q* D S H D S Q Q Annual holding cost = H = Number of pieces per order = Optimal number of pieces per order (EOQ) = Annual demand in units for the inventory item = Setup or ordering cost for each order = Holding or carrying cost per unit per year Annual holding cost = (Average inventory level) x (Holding cost per unit per year) Order quantity = = Q (Holding cost per unit per year) (H) The EOQ Model Annual setup cost = Q Q* D S H D S Q Q Annual holding cost = H = Number of pieces per order = Optimal number of pieces per order (EOQ) = Annual demand in units for the inventory item = Setup or ordering cost for each order = Holding or carrying cost per unit per year Optimal order quantity is found when annual setup cost equals annual holding cost D S = Q Solving for Q* Q H 2DS = Q2H Q2 = 2DS/H Q* = 2DS/H An EOQ Example Determine optimal number of needles to order D = 1,000 units S = $10 per order H = $.50 per unit per year Q* = 2DS H Q* = 2(1,000)(10) = 0.50 40,000 = 200 units 10 ... Reorder Points Production Order Quantity Model Quantity Discount Models Agenda for this Session (Contd.) ỵ Probabilistic Models and Safety Stock þ þ Other Probabilistic Models Fixed-Period (P) Systems... Independent Demand Need to determine when and how much to order ỵ ỵ ỵ Basic economic order quantity Production order quantity Quantity discount model The EOQ Model Annual setup cost = Q Q* D S H =... Inventory level (units) Q* Slope = units/day = d ROP (units) Figure 12.5 Time (days) Lead time = L 18 Reorder Point Example Demand = 8,000 iPods per year 250 working day year Lead time for orders