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In this session, we introduce fundamental or models that make the optimal inventory decisions Learn about eoq and poq inventory management models, order size calculation, holding & setup costs We have t periods with di erent demands
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In each period, we rst produce and then sell As mentioned under the section for relevant costs earlier in this chapter, some costs may not be included in. Unsold products become ending inventories
We want to minimize the total cost.
Unlike the economic order quantity (eoq) model, where inventory is received in a single batch, the epq model accounts for a gradual replenishment of inventory through production. The purpose of his paper is to compare economic order quantity (eoq) model, economic production lot (epl) model and (q, r) model In the background section, i have mentioned the basic assumptions of these models and equations that are used to calculate required variables. Economic order quantity (eoq) and economic production quantity (epq) both are widely and successfully used models of inventory management
Economic order quantity is the optimum order size that should be placed with a vendor to minimize blockage of funds and holding and ordering costs. (13) that is, the optimal cost per cycle is independent of the production rate, of the backorder cost, and of the holding cost And is always equal to twice the ordering or setup cost. In the model if usage and production/delivery rates are equal, there will be no inventory buildup, and thus the order quantity for batches or lots cannot be calculated i.
The next section of this paper introduces the improved production order quantity inventory model while the third section presents a simulation to illustrate the different scenarios of declining and increasing unit cost.
Learning outcomes after this session students will be able to Explain the term “economic order quantity Demonstrate “economic order quantity” with the help of graph. The objective of the eoq model is to find the optimal order quantity (the size of the order that we place each time) which can minimize our total costs
