value & atittude

8/2/2019 Value & Atittude

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Speakers-Md. Rakib Mahmud 2004334039

Abdullah-al-Mamun 2004334040

Jahid hasan 2004334041

Mohammad saidur rahman 2004334043

Sheikh khaleduzzaman shah 2004334044Md.Aminul islam 2004334045

Saiful Alam 2004334046

Md. Aminul islam 2004334047

Anik Ranjan Das Titu 2004334048

Ahsan habib 2004334049

Alok Sorkar 2004334050


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Presentation on

ECONOMIC ORDER QUANTITY (EOQ)


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Definition of EOQ

EOQ Model

Arbitrary Case Study

Limitations of EOQ


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EOQ is the optimum amount of material to order thathas the least overall inventory related cost taking intoaccount, carrying cost, ordering cost, and Stock outcosts.

These models deal with two general kinds of cost:

Holding or carrying cost

Ordering and setup cost


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The demand rate is uniform.

The item cost does not varywith the order size.

All the order is delivered at the same time.

The lead time is well known enough that an order canbe timed to arrive when inventory is exhausted.

The cost to place and receive an order is the sameregardless of the amount ordered.

The cost of holding inventory is a linear function ofthe number of items held.


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Average inventory

Q/2

Annual carrying cost (Q/2)C

Number of orders made per year-D/Q

Annual ordering cost-(D/Q)STotal cost - TSC: (Q/2)C+ (D/Q)S


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Fig.: Relation between holding costs andordering costs


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The total annual carrying costs are increasing with thevalue of Q. where the total annual ordering costs aredecreasing as the value of Q increases. Thus the totalcosts are a minimum when the total carrying costs,and purchasing costs are equal, or:

QC/2=DS/

Re-organizing and making Q the subject:Q=EOQ=(2DS/C)


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Fig.: Basic inventory Economic order quantity model


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Fig.: costs trade-offs needed to determineEconomic order quantity


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Arbitrary Calculation:

Case -1

Parameters Demand (D) 936 units/year

Order cost(S) $45

Unit holding cost (H) $15

Q=EOQ=(2DS/C)=

=75


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The weekly demand for a certain item is given over a periodof 10weeks.

1st week =20 units

2nd

week =30 units 3rd week = 25units

4th week = 15 units

5th week =28 units

6th

week =20 units 7th week =25 units

8th week =18 units

9th week = 22 units

10th

week =24 unitsThe ordering cost is $ 20per order and the carrying cost is 10

paise per item per week. What is the ordering quantity andreorder level? The lead time is one week.


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Ordering quantity =

The mean demand =

=22.8 units = 23 unitsHence D= 23 units

Q = =96 units


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Standard deviation= =4.66

For 99% service level K=3

Buffer stock = standard deviation of lead time safetyfactor

=4.663=13.98, 14units.

l d kl d d


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Average lead time consumption= mean weekly demand lead time

= 231unit=23 units

Hence reorder level =average lead time consumption+buffer stock

= 23+14 units=37 units

The order quantity =96 units

The reorder level =37 units.


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Ordering to the nearest trade quantities or packing. Modifying an order quantity to get a better freight rate. The

saving in freight may be more than compensate the extrainventory carrying cost.

Simplification of routine.

In the case of perishable or bulky items with diminishingconsumption or for items whose market prices are likely todecline, it may be better to order lass then theoretically workedout order quantities.

Seasonal supply factors, market conditions, availability oftransport facilities etc.

Liberal discounts or concessional freight rates may suggestslarger quantities.


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