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PROD 2800 PRODUCTION AND OPERATIONS MANAGEMENT Gestion de la production et des opérations

PROD 2800 PRODUCTION AND OPERATIONS MANAGEMENT Gestion de la production et des opérations. Per AGRELL agrell@poms.ucl.ac.be Lecture 4 Inventory Control. Outline. Inventories Lotsizing Fixed order quantity Assumptions EOQ EPQ All-units Discounts. Purposes of Inventory.

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PROD 2800 PRODUCTION AND OPERATIONS MANAGEMENT Gestion de la production et des opérations

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  1. PROD 2800PRODUCTION AND OPERATIONS MANAGEMENTGestion de la production et des opérations Per AGRELL agrell@poms.ucl.ac.be Lecture 4 Inventory Control

  2. Outline • Inventories • Lotsizing • Fixed order quantity • Assumptions • EOQ • EPQ • All-units Discounts PROD 2800

  3. Purposes of Inventory • 1. Decoupling of processes. • 2. Variation in demand. • 3. Variation in raw material lead time. • 4. Flexible production scheduling. • 5. Economies of scale in processes.

  4. Fixed order quantity assumptions • 1. Demand constant, deterministic, known • 2. Q continuous and unconstrained • 3. Independent demand and replenishment • 4. Delivery in batches • 5. Infinite planning horizon • Replenishment rates • Unit value v(Q) • Backlog • Inflation PROD 2800

  5. Inventory Costs • Holding (or carrying) costs. • Costs for storage, handling, insurance, etc. • Setup (or production change) costs. • Costs for arranging specific equipment setups, etc. • Ordering costs. • Costs of someone placing an order, etc. • Shortage costs. • Costs of canceling an order, etc.

  6. Independent vs. Dependent Demand

  7. General expression Cycle time Discounts Inflation Discounts PROD 2800

  8. Cost Minimization Goal Cost Q* Order Quantity (Q)

  9. EOQ I PROD 2800

  10. EPQ P Replenishment rate PROD 2800

  11. All-units discount PROD 2800

  12. All-units discount • Let price ci be valid for LiQ < Li+1 for i = 1, 2, … N • 1. Find Qi = Q*(ci) • 2. If Qi is feasible • let calculate TCi = TC (Qi ) and • Else • use Qi = Li and calculate TCi = TC (Li) • 3. Optimal Q** = argmin {TC (Qi ) } PROD 2800

  13. All-units discount PROD 2800

  14. Summary • Lotsizing single level systems • EOQ • Robustness • Flexibility (parameters, assumptions) PROD 2800

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