Post on 06-Apr-2018
8/3/2019 Chase Strategy 1 2
http://slidepdf.com/reader/full/chase-strategy-1-2 1/3
Period 1 2 3 4 5 6
Demand 5000 6000 8000 9000 9000 11000
Unitho lding cost:$60/period
Ex 6
Regular
OT
SC
5000
-
-
Final Plan 5000 6000 8800 11200 6000 11000
6000
-
-
6000
1200
1600
6000
1200
4000
0
0
6000
6000
1200
3800End Inventory 0 0 800 3000 0 0
Regular
OT
SC
Holding
Total
5000*
0
0
0
5000
6000
0
0
0
6000
6000
1380**
2000+
48++
9428
6000
1380
5000
180
12560
0
0
7500
0
7500
6000
1380
4750
0
12130
Capacity Capacityin P5
Regular 6000 0
Overtime 1200 0
Sub-contract 4000 6000
5000 x $1000 = $5,000,000 **1200 x $1150 =$1,380,000
+1600 x$1250 = 2,000,000 ++800 x$60 =$48,000
1
Lead time LT Time between placing and receiving order.
On Hand Inventory OH Physical stock
Inventory Level IL IL =OH – Quantity on backorder
Inventory Position IP IP =IL +Quantity in transit
Let’s consider different situations
Given Calculate
OH =50, LT =0 IL, IP IL =50, IP =50( 50 - 0) (50+ 0)
IL =-20, LT =0 OH, IP
OH =100, LT =3 days. We ordered 75units yesterday from supplier .
IL, IP
IL =- 40, LT =5 days, 80 units orderedyesterday, 50units ordered 3days ago.
OH, IP
Definitions cont.
IP >=IL
OH=0,IP =-20(-20 +0)
IL =100 (100+ 0)
IP =175(100 +75)
OH =0
IP =90(- 40+80+50)
20
1 The EOQ Model – Economic Order Quantity
Objective: Todetermineorder quantity (lot size) tominimizeannual inventory cost.
Developed in 1915 by Harris. Very simple, robust.Used by thousands of companies around the world.
1 Annual demand is known, occurs atuniformrate.
D: [Q / T ].
2 Ordering costS is fixed for every order. S: [$ ]
3 Holding cost Hcharged on average inventory H: [$/ (Q*T) ]
4 LotsizeQ fixed, del ivered in onelot Q: [Q]
5 No shortages permitted. IL>=0
6 Lead-time (LT ) does not vary LT : [T ]
7 One item, no quantity discount is offered
C: Purchase priceper unit
Assumptions of basic EOQ Model
Frequencyof orderingversus holding
=12,000 units / year, S =$140, C =$15/unit
nnual holding cost: 24% of C: H =15*24%=$3.6per
Lotsize Q
#of orders
Orderingcost
Averageinventory
Holdingcost
AnnualIncost( A
D/Q S.(D/Q) Q/2 H.(Q/2) S.(D/Q).+
400
800
1200
1600
30.0
15.0
10.0
7.5
4200.0
2100.0
1400.0
1050.0
200.0
400.0
600.0
800.0
720.0
1440.0
2160.0
2880.0
49
35
35
39
Need faster methodto determineorder quanti
Smaller lot size means :
• morefrequentordering, higherorderingcost
• loweraverageinventory, lower holdingcost
FromEx.1.2:D =12000units/year, S=$140,H =3.6$/unit/year
Q0 = 966.1 Policy[0,1000]
Policy[0,1500]
2. At least750perlot?
Ex 1.3:Variationsof basicEO Qmodel( youcan’talwaysorderthe exactnumberyou want)
0
1 00 0
2 00 0
3 00 0
4 00 0
5 00 0
6 00 0
7 00 0
8 00 0
9 00 0
1 00 00
1
5
0
3
0
0
4
5
0
6
0
0
7
5
0
9
0
0
1
0
5
0
1
2
0
0
1
3
5
0
1
5
0
0
1
6
5
0
1
8
0
0
L o tS i z e ( Q )
A
n
n
u
a
l
C
o
s
t s
1. At least1500perlot?
Policy[0,1000]
3. Sold in boxes(150 per box).
50,300,450,600,750, 900,1050,1200,…
900, 966.1, 1050,
AIC(900)=3486.67
AIC(1050)=3490 Policy[0,900]
3
Ex. 1.4 – cont.
D=12000 units / year
Policy: [0, 1000]
LT =1! months
Q*
I n v e n t o r y
Policy: [1500, 1000]
Order when IP =demand during lead time =D *LT
D* LT = *1! [months] =1500units12000 [units / year]12[months /year]
LT =3 months ?
D* LT =3000units((12,000/12) *3)
Ordering Policy:[ IP=3000, Q =1000 ]
Policy: [Demand inLT, Q*]
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