Basic formulas for inventory management Q Model (with variation on demand) Q* = EOQ = 2 * S * D i * C R = d *L+ ss SS = 3* VL * " TBO = Average stock = 2+ ss N TCH=D * C +2*S+(2+ss)ic P Model (with variation on demand) P~ t* Use the p model when working with an allotted time period (revision/review period 15 days) -> Golias example uses p model T = d * (P+L)+ss SS = 3* V(P + 1) * " " Average stock =~ + ss TCH =D * C + n *S+amp (d . P + ss ) * i * CBasic formulas for inventory management Symbols Variable Symbols Unit Purchasing cost C (or P) |Per unit Ordering cost S Per order Period of time between orders t ;P; TBO |Time Horizon H Time Service level % ; equiv. z Number of standard deviations Number of orders Number or orders S N Revision Period Time Reorder point Number of products Lead time Time Demand Number of units Economic order quantity Number of units Quantity Number of units Target invento Number of units ss___|Number of units Economic Order Quantity TCy= D*C+g*S+%*i*C i o*=E0Q= (22 t*=TBO*= | 25 i*C*D Q = d*TBO R=d*L n=D/Q Exercise 9 Russel, Lda (RSS) imports sweets. Drops are supplied from Spain by BARCINO, a company located in Barcelona. Both RSS and BARCINO work 52 weeks a year. RSS has its warehouse in Carregado. From this warehouse it supplies its 4 retail stores. RSS receives daily orders from the stores from Monday to Saturday. Stores are open from Monday to Saturday, from 10:00 to 22:00. The warehouse supplies one day after the order, 6 days a week. BARCINO supplies every Tuesday before 10:00 at the central warehouse, according to the orders placed on Friday until 10:00. Note that the warehouse works 6 days a week, from Monday to Saturday. The daily demand from each store, and daily standard deviation in demand, in boxes, are as follows (demand (standard deviation)): Drops Lisbon 25(2) Porto 35 (4) Braga 25 (3) Setubal 20(2) Note: RSS places orders in boxes, is supplied in boxes and delivers in boxes BARCINO (drops) Ordering cost 20 per order Selling price (box) 125 per box Cost price (box) 50 per box Carrying cost (per year) 56% / year Service level (99,9%) Z=3,09 Stock on hand, in the 330 boxes warehouse Orders already placed 0 boxes 1 week 6 days a) Today is Friday 9:00am. RSS Logistics Director asks you to identify how many boxes should be ordered. b) Knowing in advance that BARCINO is willing to change the time between orders and keep lead time, the Director of RSS is not satisfied with the average inventory level of drops as they consider that it is too high. The following suggestion is made: \"Without changing the inventory model, | think we should change our time between orders (TBO) to become closer to the economic time between orders (TBO*). | think that this would decrease the average level of inventory of drops\". Comment on this statement and justify your position. need to Review Operations Midterms Final 51 Inventory Management exercise 9 ( RUSSELD) 25 (2 ) BARCINO RSS WL 35 ( 4 ) 25 ( 3) P = 1 week = 6 days 20 ( 2 ) 1 3 days s DE= 1 day closed sunday L = I day orders friday s delivers Tuesday 1 week - 6 days why are these 1 year : 52 weeks a ) I = d ( P + 1 ) + 2 0 1 P + L . 6 y = ( 25 + 35 + 25 + 20 ) - 16 + 3) + 3. 09 - 1 6+3 x7 72+42+32+23 = 945 + 53.25 = 99 9, 25 - 999 boxes Order at = 999 - 330 = 669 boxes = because I > Stock on hand 6 ) + * = TBO * : -2 * 5 : 2 X 20 - 7 10.56 . 50 - 105 . 6. 52 = 0. 0066036 years holding cost purchasing demandin ( * 6 * 52 ) = cost horizon = 2.06 days 105 . 6 inventory ( P - 6days ) 2 + 3. 09 . 76 +3 - 622+42+ 32+22 = 368. 25 boxes inventory ( P= 2 days) = 105 . 2 2 + 3 09 x -1 2 +3 . 1 22 4 42 + 32 + 2 2 = 144, 69 boxes