Inventory models example in Materials Management

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Basic Inventory Models (EOQ) Examples

On the basis of the theory developed here some of the example of the basic inventory models are given below for easy understanding of the concept as well as to enable one solve the day to day Inventory problems too as far as determining the Economic Order Quantities , Time for ordering etc,.are concerned

The Classical Model

Demand rate: x
Ordering cost: C₁
Holding cost: C₂

Optimal Ordering Is: Q*
Optimal Cycle Is: T*
Number of Orders Is: n*
Total Cost Is: TC

Shortages Permitted Model

Demand rate: x
Ordering cost: C₁
Holding cost: C₂
Shortage cost: C₃
Backorder cost: C₄

Optimal Ordering Is: Q*
Optimal Shortage Is: S*
Total Cost Is: TC
Shortage Period Is: T₂
Period per Cycle Is: T

Production and Consumption Model

Production rate: K
Demand rate: x
Holding cost: C₂
Set-up cost: C₁

Optimal Run Size Is: Q*
Production Cycle Is: T ₁*
Optimal Cycle Is: T*
Cost per Cycle Is: TC

Production and Consumption with Shortages Model

Production rate: K
Demand rate: x
Setup cost: C₁
Holding cost: C₂
Backorder cost: C₄

Optimal Production Is: q*
Optimal Inventory Is: Q*
Optimal Shortage Is: P*
Total Cost Is: TC
Period per Cycle Is: T

EOQ with Shortages and Lead Time

I: Base Economic Order Quantity
Total Demand
Ordering Cost
Holding Cost/unit/year
Unit Price

EOQ
Average Periodic Ordering Intervals
Total Number of Orders
Total Cost

II: EOQ with Shortages and Lead Time
Estimated Lead Time in Days
Shortage Cost/unit/year

EOQ
Level for Reorder Point
Maximum Inventory Level
Total Cost
Longest Delay Time in Days