Microsoft Excel Data Analysis and Business Modeling (Office 2021 and Microsoft 365), 7th Edition

Chapter 87

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, while avoiding back orders?

• At what inventory level should I place an order if my goal is to minimize annual holding, ordering, and shortage costs, while avoiding lost sales?

• How do I determine the reorder point if I want to achieve a 95 percent service level?

In Chapter 86, “The economic order quantity inventory model,” I showed you 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 ...