1. William J. Stevenson Operations Management 8 th edition

2. CHAPTER 11 Inventory Management McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

3. Inventory : a stock or store of goods Independent Demand A B(4) C(2) D(2) E(1) D(3) F(2) Dependent Demand Independent demand is uncertain. Dependent demand is certain.

17. The Inventory Cycle Figure 11.2 Profile of Inventory Level Over Time Quantity on hand Q Receive order Place order Receive order Place order Receive order Lead time Reorder point Usage rate Time

18. Total Cost Annual carrying cost Annual ordering cost Total cost = + Q 2 H D Q S TC = +

19. Cost Minimization Goal Order Quantity (Q) The Total-Cost Curve is U-Shaped Ordering Costs Q O Annual Cost ( optimal order quantity) Figure 11.4C

24. Economic Run Size

25. Total Costs with Purchasing Cost Annual carrying cost Purchasing cost TC = + Q 2 H D Q S TC = + + Annual ordering cost PD +

26. Total Costs with PD Figure 11.7 Cost EOQ TC with PD TC without PD PD 0 Quantity Adding Purchasing cost doesn’t change EOQ

27. Total Cost with Constant Carrying Costs Figure 11.9 OC EOQ Quantity Total Cost TC a TC c TC b Decreasing Price CC a,b,c

30. Safety Stock Figure 11.12 Safety stock reduces risk of stockout during lead time LT Time Expected demand during lead time Maximum probable demand during lead time ROP Quantity Safety stock

31. Reorder Point Figure 11.13 The ROP based on a normal Distribution of lead time demand ROP Risk of a stockout Service level Probability of no stockout Expected demand Safety stock 0 z Quantity z-scale