Search results
Results from the WOW.Com Content Network
Economic order quantity (EOQ), also known as financial purchase quantity or economic buying quantity, [citation needed] is the order quantity that minimizes the total holding costs and ordering costs in inventory management. It is one of the oldest classical production scheduling models.
The dynamic lot-size model in inventory theory, is a generalization of the economic order quantity model that takes into account that demand for the product varies over time. The model was introduced by Harvey M. Wagner and Thomson M. Whitin in 1958. [1] [2]
For example, if the product sold in a retailer's outlet is received from one of its distribution centers, the distribution center represents one echelon of the supply chain and the outlet another one. It should be clear that the amount of stock needed at the outlets is a function of the service received from the distribution center.
Planning data. This includes all the restraints and directions to produce such items as: routing, labor and machine standards, quality and testing standards, pull/work cell and push commands, lot sizing techniques (i.e. fixed lot size, lot-for-lot, economic order quantity), scrap percentages, and other inputs.
The reorder point (ROP), also reorder level (ROL) or "optimal re-order level", [1] is the level of inventory which triggers an action to replenish that particular inventory. It is a minimum amount of an item which a firm holds in stock, such that, when stock falls to this amount, the item must be reordered.
The benefit of these formulas is that the first absorbs all overheads of production and raw material costs into a value of inventory for reporting. The second formula then creates the new start point for the next period and gives a figure to be subtracted from the sales price to determine some form of sales-margin figure.
This method is an extension of the economic order quantity model (also known as the EOQ model). The difference between these two methods is that the EPQ model assumes the company will produce its own quantity or the parts are going to be shipped to the company while they are being produced, therefore the orders are available or received in an ...
Compared to the EOQ equation, there is a factor d/p introduced. This is due to the fact that when we produce a component while it is used in downstream production at the same time, inventory levels will not reach the same peak as when we order the components from a supplier and receive the batch at a single point in time.