Chapter 77. Inventory Modeling with Uncertain Demand
Questions answered in this chapter:
At what inventory level should I place an order if my goal is to minimize annual holding, ordering, and shortage costs?
What does the term 95-percent service level mean?
In Chapter 76, I showed how to use the economic order quantity (EOQ) to determine an optimal order quantity and production batch size. The examples assumed that demand occurred at a constant rate. Thus, if annual demand occurred at a rate of, for example, 1,200 units per year, monthly demand would equal 100 units. As long as demand occurs at a relatively constant rate, the EOQ is a good approximation of the cost-minimizing order quantity.
In reality, demand during any time period is uncertain. ...
Get Microsoft® Excel® 2010: Data Analysis and Business Modeling now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
