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Inventory Management (2. Inventory Costs (item costs = purchase price +…
Inventory Management
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2. Inventory Costs
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ordering costs = production control cost + setup costs + lost capacity cost
average ordering cost per order = ( fixed cost/ number of orders) + variable cost
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capacity-related costs
involve: overtime, shift premiums, hire & layoff, unused capacity, training cost, etc.
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5. Order Quantities
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lot-size decision rules
lot-for-lot (L4L): generate planned orders in quantities equal to the net requirements in each period.
fixed order quantity: generate for a predetermined fixed quantity. the same amount of SKUs per order.
order n period of supply: each order size equals with holding costs and ordering costs for the interval.
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