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Economic Production Quantity
The economic production quantity model (also known as the EPQ model) determines the quantity a company or retailer should order to minimize the total inventory costs by balancing the inventory holding cost and average fixed ordering cost. The EPQ model was developed by E.W. Taft in 1918. 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 incremental manner while the products are being produced. While the EOQ model assumes the order quantity arrives complete and immediately after ordering, meaning that the parts are produced by another company and are ready to be shipped when the order is placed. In some literature, "economic manufacturing quantity" model (EMQ) is used for "economic productio ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Holding Cost
In marketing, carrying cost, carrying cost of inventory or holding cost refers to the total cost of holding inventory. This includes warehousing costs such as rent, utilities and salaries, financial costs such as opportunity cost, and inventory costs related to perishability, ''shrinkage'' ( leakage) and insurance. Carrying cost also includes the opportunity cost of reduced responsiveness to customers' changing requirements, slowed introduction of improved items, and the inventory's value and direct expenses, since that money could be used for other purposes. When there are no transaction costs for shipment, carrying costs are minimized when no excess inventory is held at all, as in a Just In Time production system. Excess inventory can be held for one of three reasons. Cycle stock is held based on the re-order point, and defines the inventory that must be held for production, sale or consumption during the time between re-order and delivery. Safety stock is held to account for v ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economic Order Quantity
Economic Order Quantity (EOQ), also known as Economic Buying Quantity (EPQ), 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 model was developed by Ford W. Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, and K. Andler are given credit for their in-depth analysis. Overview EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered; an order is assumed to contain only 1 unit. There is also a cost for each unit held in storage, commonly known as holding cost, sometimes expressed as a percentage of the purchase cost of the item. While the EOQ formulation is straightforward there are factors such as transportation rates and quantity discounts to consider in actual applicatio ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Lead Time
A lead time is the latency between the initiation and completion of a process. For example, the lead time between the placement of an order and delivery of new cars by a given manufacturer might be between 2 weeks and 6 months, depending on various particularities. One business dictionary defines "manufacturing lead time" as the total time required to manufacture an item, including order preparation time, queue time, setup time, run time, move time, inspection time, and put-away time. For make-to-order products, it is the time between release of an order and the production and shipment that fulfill that order. For make-to-stock products, it is the time taken from the release of an order to production and receipt into finished goods inventory. Supply chain management A conventional definition of lead time in a supply chain management context is the time from the moment the customer places an order (the moment the supplier learns of the requirement) to the moment it is ready for de ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
EPQ Graph
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EPQ may refer to: * Economic production quantity * Épargne Placements Québec, an administrative unit of the Quebec Ministry of Finance * Extended Project Qualification, in the United Kingdom * Eysenck Personality Questionnaire In psychology, the Eysenck Personality Questionnaire (EPQ) is a questionnaire to assess the personality traits of a person. It was devised by psychologists Hans Jürgen Eysenck and Sybil B. G. Eysenck. Hans Eysenck's theory is based primarily on p ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Reorder Point
The reorder point (ROP) is the level of inventory which triggers an action to replenish that particular inventory stock. 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. It is normally calculated as the forecast usage during the replenishment lead time plus safety stock. In the EOQ (Economic Order Quantity) model, it was assumed that there is no time lag between ordering and procuring of materials. Continuous Review System The reorder point for replenishment of stock occurs when the level of inventory drops down to zero. In view of instantaneous replenishment of stock the level of inventory jumps to the original level from zero level. In real life situations one never encounters a zero lead time. There is always a time lag from the date of placing an order for material and the date on which materials are received. As a result the reorder point is always higher than zero, and if the firm place ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Safety Stock
Safety stock is a term used by logistics, logisticians to describe a level of extra stock that is maintained to mitigate risk of stockouts (shortfall in raw material or packaging) caused by uncertainties in supply and demand. Adequate safety stock levels permit business operations to proceed according to their plans.Monk, Ellen and Bret Wagner. Concepts in Enterprise Resource Planning. 3rd Edition. Boston: Course Technology Cengage Learning, 2009. Safety stock is held when uncertainty exists in demand, supply, or manufacturing yield, and serves as an insurance against stockouts. Safety stock is an additional quantity of an item held in the inventory to reduce the risk that the item will be out of stock. It acts as a buffer stock in case sales are greater than planned and/or the supplier is unable to deliver the additional units at the expected time. With a new product, safety stock can be used as a strategic tool until the company can judge how accurate its forecast is after the fi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economic Order Quantity
Economic Order Quantity (EOQ), also known as Economic Buying Quantity (EPQ), 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 model was developed by Ford W. Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, and K. Andler are given credit for their in-depth analysis. Overview EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered; an order is assumed to contain only 1 unit. There is also a cost for each unit held in storage, commonly known as holding cost, sometimes expressed as a percentage of the purchase cost of the item. While the EOQ formulation is straightforward there are factors such as transportation rates and quantity discounts to consider in actual applicatio ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Base Stock Model
The base stock model is a statistical model in inventory theory.W.H. Hopp, M. L. Spearman, Factory Physics, Waveland Press 2008 In this model inventory is refilled one unit at a time and demand is random. If there is only one replenishment, then the problem can be solved with the newsvendor model. Overview Assumptions # Products can be analyzed individually # Demands occur one at a time (no batch orders) # Unfilled demand is back-ordered (no lost sales) # Replenishment lead times are fixed and known # Replenishments are ordered one at a time # Demand is modeled by a continuous probability distribution Variables *L = Replenishment lead time *X = Demand during replenishment lead time *g(x) = probability density function of demand during lead time *G(x) = cumulative distribution function of demand during lead time *\theta = mean demand during lead time *h = cost to carry one unit of inventory for 1 year *b = cost to carry one unit of back-order for 1 year *r = reorder point *SS=r-\t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Dynamic Lot Size Model
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. Harvey M. Wagner and Thomson M. Whitin, "Dynamic version of the economic lot size model," Management Science, Vol. 5, pp. 89–96, 1958 Problem setup We have available a forecast of product demand over a relevant time horizon t=1,2,...,N (for example we might know how many widgets will be needed each week for the next 52 weeks). There is a setup cost incurred for each order and there is an inventory holding cost per item per period ( and can also vary with time if desired). The problem is how many units to order now to minimize the sum of setup cost and inventory cost. Let us denote inventory: I=I_+\sum_^x_-\sum_^d_\geq0 The functional equation representing minimal cost policy is: f_(I)=\underset\left i_I+H(x_)s_+f ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economic Lot Scheduling Problem
The economic lot scheduling problem (ELSP) is a problem in operations management and inventory theory that has been studied by many researchers for more than 50 years. The term was first used in 1958 by professor Jack D. Rogers of Berkeley, who extended the economic order quantity model to the case where there are several products to be produced on the same machine, so that one must decide both the lot size for each product and when each lot should be produced. The method illustrated by Jack D. Rogers draws on a 1956 paper from Welch, W. Evert. The ELSP is a mathematical model of a common issue for almost any company or industry: planning what to manufacture, when to manufacture and how much to manufacture. Model formulation The classic ELSP is concerned with scheduling the production of several products on a single machine in order to minimize the total costs incurred (which include setup costs and inventory holding costs). We assume a known, non-varying demand d_j, j=1,\cdots,m ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
