Persediaan:

Bahan atau barang yang disimpan yang akan digunakan untuk

memenuhi tujuan tertentu. (proses produksi dll)

Jenis-jenis persediaan:
1. Persediaan bahan mentah (raw material inventory)
2. Persediaan barang dalam proses (work in process inventory)
3. MRO (maintenance/repair/operating)
4. Persediaan barang jadi
Tujuan Manajemen Persediaan:
Menentukan keseimbangan antara investasi persediaan dan
pelayanan pelanggan

Pentingnya persediaan:
1. Tidak ada perusahaan tanpa persediaan
2. Masuk dalam pos aktiva lancar
3. Mempunyai pengaruh terhadap besar kecilnya biaya
operasional
Berbagai pandangan terhadap persediaan
1. Pemasaran

Persediaan tinggi dapat melayani pelanggan sebaik mungkin

2. Pembelian
Beli banyak > discount

Biaya angkut lebih murah

3. Produksi

Persediaan tinggi, produksi lancar tidak kekurangan bahan

4. Keuangan

Persediaan rendah mengurangi investasi dan biaya gedung

Fungsi Penting Persediaan:
1. Menghilangkan resiko keterlambatan pengiriman bahan baku/ barang
yang dibutuhkan perusahaan

2. Menghilangkan resiko jika material yang dipesan tidak baik dan harus
dikembalikan

3. Menghilangkan resiko terhadap kenaikan harga/ inflasi

4. Menyimpan bahan baku yang dihasilkan secara musiman sehingga

perusahaan tidak kesulitan jika bahan baku tidak tersedia dipasaran

5. Mendapat keuntungan dari pembelian berdasarkan potongan kuantitas

6. Memberi pelayanan kepada pelanggan dengan tersedianya barang

yang diperlukan
 Analisis ABC (ABC Analysis)
Suatu metode untuk membagi persediaan di tangan ke dalam 3 kelompok
berdasarkan pada volume tahunan dalam jumlah uang .

Prinsip Pareto (Vilfredo Pareto, Ekonom Italia abad 19)

“beberapa hal sangat penting, banyak hal sepele”
Gagasannya membuat kebijakan persediaan yang memfokuskan
persediaan pada bagian penting yang sedikit bukan pada bagian
persediaan yang banyak tp sepele.
Tidak realistis memantau barang murah dengan intensitas yang
sama dengan barang yang sangat mahal
Persediaan Kelas A
Barang-barang yang volume uang tahunannya tinggi, meskipun
hanya mewakili 15% dari total persediaan tetapi mewakili 70-
80% dari total penggunaan uang.

Persediaan Kelas B
Barang-barang persediaan dengan volume uang tahunan yang
sedang, barang ini mewakili sekitar 30% dari barang-barang
persediaan dan 15%-25% dari nilai totalnya.

Persediaan Kelas C
Barang-barang volume uang tahunan yang kecil, hanya mewakili
5% dari volume uang tahunan tetapi mewakili 55% dari total
persediaan barang
Kriteria lain:
A. Biaya kekurangan persediaan atau penyimpanan yg tinggi
B. Perubahan teknis yg dpt diantisipasi
C. Masalah Pengiriman
D. Masalah Kualitas

Klasifikasi ABC membantu manajemen perusahaan dalam

menentukan kebijakan yg berhubungan dg persediaan di
perusahaan seperti:
More emphasis on supplier development for A items,
Pengendalian persedian physic yang lebih ketat untuk kelas A dan
Lebih diperhatikan dalam peramalan barang kelas A
Kebijakan-kebijakan:
Kelas A
Perencanaan dan pengendalian yg cukup ketat, perlu keterlibatan
manajemen puncak
Kelas B
Sangat tidak efisien jika manajemen puncak harus
terjun langsung melakukan pengendalian persediaan,
dapat menggunakan model optimasi sehingga didapat
jumlah persediaan optimal dan biaya minimal
Kelas C
Menggunakan model pengendalian persediaan sederhana, tidak perlu formula
rumit dan pelaksanaan yg ketat, hanya menjaga agar perusahaan tidak
kehabisan persediaan meskipun cukup murah tp ketiadaan persediaan kelas C
akan mengganggu jalannya proses produksi
The annual consumption value is calculated with the formula:

(Annual demand) x (item cost per unit)

Example

Percentage of Percentage value

items of annual usage
Close day to
Class A items About 20% About 80%
day control
Regular
Class B items About 30% About 15%
review
Infrequent
Class C items About 50% About 5%
review
STEP 1
Calculate the total spending per year

Total cost per year: Unit cost * total cost per year
 STEP 2
Calculate the usage of item in total usage

Usage as a % of total usage = usage of item/total usage

STEP 3
Sort the items by usage
STEP 4
Results of calculation
Additional rules for ABC analysis

A≤B≤C
Keakuratan catatan persediaan
1. Merupakan hal yg sangat penting dalam Manajemen
Persediaan, Penjadwalan Produksi dan Penjualan
2. Memungkinkan perusahaan focus pada barang yang
dibutuhkan
3. Sangat penting untuk membuat keputusan yang tepat
mengenai pemesanan, skedul produksi dan
pengiriman
4. Catatan keluar masuk persediaan harus tepat
5. Gudang tertata dengan baik dan aman
Perhitungan siklus (cycle counting)
Audit berkelanjutan dari persediaan dengan
catatan persediaan

Contoh:
Perusahaan memiliki inventory 5000 item, dengan
klasifikasi barang A sebanyak 500, barang B
sebanyak1750 dan barang C sebanyak 2750.
kebijakan perusahaan adalah menghitung semua
barang A setiap bulan (setiap 20hr kerja) barang B
setiap 3 bulan ( setiap 60hr kerja) dan barang C
setiap 6 bulan ( setiap 120hr kerja). Kemudian,
perusahaan mengalokasikan beberapa barang untuk
dihitung setiap hari.
Kelas Barang Kuantitas Kebijakan perhitungan Jumlah barang yang
siklus dihitung perhari

A 500 Setiap bulan (20hr kerja) 500/20 = 25/hari

B 1.750 Setiap 3 bulan (60hr kerja) 1.750/60 = 29/hari

C 2.750 Setiap 6 bulan (120hr kerja) 2.750/120 = 23/hari

77/hari
Keuntungan Perhitungan Siklus:

1. Elliminates shoutdowns and interruptions

2. Elliminates annual inventory adjustment
3. Audit keakuratan persediaan dilakukan oleh
karyawan terlatih
4. Memungkinkan mengidentifikasi penyebab kesalahan
dan memperbaikinya
5. Menjaga kekuratan catatan persediaan
Pengendalian permintaan jasa
 Merupakan komponen yang sangat kritikal dan memiliki
dampak yang besar dalam pencapaian profit
 Kehilangan/kerugian dapat disebabkan karena penyusutan
(shrinkage) atau pencurian (pilferage)
 Shrinkage adalah persediaan ritel yang tidak tercatat
antara kuitansi dan penjualan
 Pilferage adalah pencurian dalam jumlah kecil
 Beberapa teknik untuk mengatasinya:
1. Seleksi, pelatihan dan pendisiplinan karyawan yg baik
2. Pengendalian ketat dari penerimaan barang
3. Kontrol yang efektif untuk pengeluaran barang #
INVENTORY COST
o Biaya Penyimpanan (Holding Cost)
Biaya yang terkait dengan menyimpan atau “membawa”
persediaan selama waktu tertentu
o Biaya Pemesanan ( Oerdering Cost)
Biaya yang terkait dengan penempatan pesanan dan penerimaan
barang
o Biaya Pemasangan (Set-up Cost)
Biaya untuk mempersiapkan mesin atau proses untuk menghasilkan
pesanan
o Biaya Kekurangan Persediaan (Stockout Cost)
Biaya yang timbul akibat tidak tersedianya barang pada
waktu yang diperlukan, pada dasarnya bukan biaya riil
melainkan berupa biaya kehilangan kesempatan.
BIAYA PENYIMPANAN
(HOLDING COST)

Investment costs (borrowing, interest).

Insurance.
Taxes.
Storage and handling.
Extra staffing.
Pilferage, damage, spoilage, scrap.
Obsolescence.
INVENTORY HOLDING COSTS – USUALLY 20-30%
OF TOTAL
Category Biaya (% Nilai Persedian)

Housing Cost (Sewa atau depresiasi

gedung, biaya operasi, pajak dan 3-10%
asuransi)
Material Handling Cost (Sewa atau
depresiasi peralatan, daya dan 1-3.5%
biaya operasi)
Labor Cost ( Penerimaan,
pergudangan dan keamanan) 3-5%

Pilferage, Scrap and Absolescence

(Pencurian, sisa dan barang using) 2-5%

Investment Cost (biaya peminjaman,

pajak dan asuransi pd persediaan) 6-24%
ORDERING COSTS
To order and receive product:
Supplies.
Forms.
Order processing.
Clerical support.
etc.
SETUP COSTS
To change equipment and setup for new product:
Clean-up costs.
Re-tooling costs.
Adjustment costs.
etc.
STOCKOUT COSTS
For not making a sale and for lost future sales:
- Customer may wait for a backorder, or
- Cancel order (and acquire product elsewhere).
Backorder costs: expediting, special orders, rush
shipments, etc.
Lost current sale cost.
Lost future sales (hard to estimate).
INVENTORY QUESTIONS
How much to order (each time)?
 100 units, 50 units, 23.624 units, etc.
When to order?
 Every 3 days, every week, every month, etc.
 When only 5 items are left, when only 10 items are
left, when only 20 items are left, etc.
Many different models can be used, depending on
nature of products and demand
INDEPENDENT VS. DEPENDENT DEMAND
Independent demand - Demand for item is independent
of demand for any other item.

Dependent demand - Demand for item depends upon

the demand for some other item.
 Example: Demand for car engines depends on
demand for new cars.

We will consider only independent demand.

INVENTORY MODELS
Fixed order-quantity models.
 1. Economic order quantity (EOQ).
 2. Production order quantity (POQ).
 3. Quantity discount.
Probabilistic models.
Fixed order-period models.
HOW MUCH AND WHEN TO ORDER?
With many small orders:
 Amount on hand is always small, so inventory is small.
 Frequent orders means cost of ordering is large.

With few large orders:

 Amount on hand may be large (when order arrives), so
inventory may be large.
 Infrequent orders mean cost of ordering is small.
EOQ – ECONOMIC ORDER QUANTITY
MODELS
How much to order (each time)?
 Order size is a constant = Q
 Q is selected to minimize total cost.
When to order?
 Order when amount remaining = ROP (Re-
Order Point)
 ROP is selected so chance of running out is
small.
EOQ ASSUMPTIONS
Barang yang disimpan dan dipesan hanya 1 macam
Kebutuhan/ permintaan barang diketahui dan konstan
Biaya pemesanan dan penyimpanan diketahui dan
konstan
Barang yang dipesan diterima dalam 1 batch
Harga barang tetap dan tidak tergantung dari jumlah
yang dibeli (tidak ada potongan kuantitas)
Waktu tenggang (lead time) diketahui dan konstan
EOQ MODEL - HOW MUCH TO ORDER?
Annual Cost

Order Cost Curve

Order Quantity
EOQ MODEL - HOW MUCH TO ORDER?
Annual Cost

Order Cost Curve

Optimal Order Quantity

Order Quantity (EOQ=Q*)
WHY HOLDING COSTS INCREASE
For fixed annual demand,
larger order quantities means:
 Larger inventory (larger amount ordered each time).
 Larger inventory holding cost.
Example: Annual demand = 1200 units
 Order 600 each time.
 Maximum inventory = 600
 Order 50 each time.
 Maximum inventory = 50
WHY ORDER COSTS DECREASE
For fixed annual demand,
larger order quantities means:
 Fewer orders per year.
 Smaller order cost per year.
Example: Annual demand = 1200 units
 Order 600 each time.
 1200/600 = 2 orders per year.
 Order 50 each time.
 1200/50 = 24 orders per year.
EOQ MODEL EQUATIONS
D = Permintaan tahunan
S = Biaya pemesanan untuk setiap pesanan Given
H = Biaya penyimpanan per unit per tahun
d = Permintaan perhari (units per day, units per week, etc.)
L = Lead time (constant) (in days, weeks, hours, etc.)

Determine: Q = Order size (number of items per order)

D
Jumlah Pesanan yg diharapkan = N =
Q
D
Biaya Pemesanan = S
Q
Q H
Biaya Penyimpanan = (rata2 tingkat persediaan)  H =
2
EOQ MODEL - AVERAGE INVENTORY LEVEL
Maximum inventory = Q
Inventory Level Minimum inventory = 0

Order Average
Quantity Inventory
(Q) (Q/2)

0
Time
EOQ MODEL - HOW MUCH TO ORDER?
Annual Cost

Order Cost Curve = (D/Q)S

Optimal Order Quantity

Order Quantity (EOQ=Q*)
 EOQ TOTAL COST OPTIMIZATION
D Q
Total Cost = S+ H
Q 2
Take derivative of total cost with respect to Q and set equal to zero:
D 1
S + H=0
Q2 2
Solve for Q to get optimal order size:

2 ×D ×S
EOQ = Q* =
H
 EOQ MODEL EQUATIONS
D = Permintaan tahunan
S = Biaya Pemesanan untuk setiap pesanan
H = Biaya Penyimpanan per unit per tahun

Optimal Order Quantity 2 ×D ×S

= Q* =
H
Jumlah pesanan yg diharapkan = N =
D
Q*
Jumlah hari kerja setahun
Waktu antara pesanan yg diharapkan = T =
N
EOQ MODEL - WHEN TO ORDER?
D = Permintaan tahunan (relatively constant)
d = Permintaan perhari Given
L = Lead time

ROP = Re-Order Point (Tingkat persediaan/titik dimana

apabila persediaan mencapai tingkat itu, pemesanan
harus dilakukan)

D
d =
Jumlah hari kerja dalam setahun
ROP = d × L
 EOQ MODEL - WHEN TO ORDER
Inventory Level Lead Time = time between placing
and receiving an order
Q*

Reorder
Point
(ROP)

Time
1st order 1st order 2nd order 3rd order 4th order
placed received
 EOQ EXAMPLE
Permintaan = 1200/th
Biaya Pemesanan = $50/pesanan
Biaya Penyimpanan= $5 per year per item
260 hari kerja pertahun

2 ×1200 ×50 = 154.92 units/order; so order 155 each time

Q* =
5
1200/year
Jumlah pesanan yg diharapkan = N = = 7.74/year
155
260 days/year
Waktu antara pesanan yg diharapkan = T = = 33.6 days
7.74/year
1200 155
Total Cost = 50 + 5 = 387.10 + 387.50 = $774.60/year
155 2
 EOQ IS ROBUST (KUAT)
Permintaan = 1200/th
Biaya Pemesanan = $50/pesanan 1200 Q
Total Cost = 50 + 5
Biaya Penyimpanan= $5 per year per item Q 2
260 hari kerja pertahun

Q = 155 units/order TC = $774.60/year

Q* = 154.92 units/order TC = $774.60/year = 387.30 + 387.30
Suppose we must order in multiples of 20:
Q = 140 units/order TC = $778.57/year (+0.5%)
Q = 160 units/order TC = $775.00/year (+0.05%)
Cost is nearly optimal!
 EOQ IS ROBUST
Permintaan = 1200/th
1200 Q
Biaya Pemesanan = $50/pesanan Total Cost = 50 + 5
Biaya Penyimpanan= $5 per year per item Q 2
260 hari kerja pertahun

Q = 155 units/order TC = $774.60/year

Q* = 154.92 units/order TC = $774.60/year = 387.30 + 387.30
Suppose we wish to order 6 times per year (every 2 months):
Q = 1200/6 = 200 units/order (200unit/order is 29% above Q*)
TC = $800.00/year = 300.00 + 500.00
(Cost is only 3.3% above optimal: $800 vs. $774.60)
EOQ MODEL IS ROBUST
Annual Cost

Small
variation
in cost

154.92 Order Quantity

Large variation
in order size
 ROBUSTNESS
EOQ amount dapat disesuaikan dengan bisnis yg ada
Jika ukuran pesanan mendekati optimal (+ or - 20%),
maka biaya akan mendekati optimal (dalam bbrp
percent).
Jika parameter (biaya pesanan, biaya penyimpanan,
permintaan) tidak diketahui dengan pasti maka EOQ
sangat dibutuhkan.
EOQ MODEL - WHEN TO ORDER?
Permintaan = 1200/th
Biaya Pemesanan = $50/pesanan
Biaya Penyimpanan= $5 per year per item
260 hari kerja pertahun
Lead time = 5 days

1200/year
d = = 4.615/day
260 days/year

ROP = 4.615 units/day 5 days = 23.07 units

-> Place an order whenever inventory falls to (or below) 23 units #

PRODUCTION ORDER QUANTITY MODEL
1. Pesanan persediaan di terima pada suatu waktu
2. Mrp pengembangan dari model EOQ
3. Model provides production lot size for one product.
4. Similar to EOQ with setup cost rather than order cost.
PRODUCTION ORDER QUANTITY MODEL
Consider one product at a time.
Produce Q units in a production run; then switch and
produce other products.
Later produce Q more units in 2nd production run (Q units
of product of interest).
Later produce Q more units in 3rd production run, etc.
 POQ MODEL INVENTORY LEVELS
Inventory Level
Production portion of cycle

Demand portion of cycle with no

production (of this product)

Time

Production
Production Run Ends
Begins
POQ MODEL INVENTORY LEVELS
Inventory Level
Production rate = p = 20/day
Demand rate = d = 7/day
Slope = p-d = 13/day

Slope = -d = -7/day

Time

Production Production Note: Not all of production goes into

Begins Run Ends inventory
POQ MODEL INVENTORY LEVELS
Inventory Level
Production rate = p = 20/day
Demand rate = d = 7/day
Slope = p-d = 13/day
Inventory increases by 13 each day
while producing

Slope = -d = -7/day
Inventory decreases by 7/day
after producing

Time

Production Production Note: 1-(d/p) = fraction of production

Begins Run Ends that goes into inventory
 POQ MODEL EQUATIONS
D = Kebutuhan tahunan (relatively constant)
S = Biaya pemasangan Given
H = Biaya penyimpanan
d = tk permintaan harian (units per day, units per week, etc.)
p = Production rate (units per day, units per week, etc.)

Determine: Q = Production run size (number of items per production run)

D
Number of Production Runs per year =
Q
D
Setup Cost per year = S
Q
Holding Cost per year = (average inventory level)  H
POQ MODEL INVENTORY LEVELS
Inventory Level Maximum Inventory
= Q(1-(d/p))

Production
Portion of Cycle

Demand portion of cycle Time

with no supply
 POQ MODEL EQUATIONS
D = Kebutuhan tahunan (relatively constant)
S = Biaya pemasangan/ Setup per pesanan Given
H = Biaya penyimpanan per unit per year
d = tk permintaan harian (units per day, units per week, etc.)
p = Production rate (units per day, units per week, etc.)

Determine: Q = Production run size (jumlah qty per production run)

Jumlah Production Runs per tahun = D
Q
D
Biaya Pemasangan = S
Q
Q
Biaya Penyimpanan = (ave. inventory level)  H = H [1-(d/p)]
2
POQ MODEL EQUATIONS
D = Kebutuhan tahunan
S = Biaya pemasangan
H = Biaya penyimpanan Given
d = tk permintaan harian p = Production rate

Qty Optimal Production Run

2 ×D ×S 2DS p
= Q* = =
H[1-(d/p)] H p-d

i-Max = Q [1- (d/p)]

D Q H [1-(d/p)]
Total Cost = S+
Q 2
 RUN LENGTH & CYCLE LENGTH
Production Run length (time) = Q /p
Inventory Level

Time

Cycle length (time) = Q /d

 POQ EXAMPLE
Kebutuhan = 1000/year (of product A) Tk permintaan= d = 1000/365
Biaya Setup = $100/setup = 2.74/day
Biaya Penyimpanan= $20 per year per item
Production rate = 10/day
365 hari kerja pertahun

2 ×1000×100 = 117.36 units/run

Qp* =
20×[1-(2.74/10)]

i-Max = 117.36 [1- (2.74/10)] = 85.2 units

1000 100 + 117.36 20 [1-(2.74/10)]

Total Cost =
117.36 2

= 852.08 + 852.03 = $1704.11/year

 POQ EXAMPLE
Kebutuhan = 1000 units/year
Production rate = 10 units/day
Qp* = 117.36 units per run

42.8

Demand rate = d = 1000/365

= 2.74/day

11.74

Lama Production run = 117.36/(10/day) = 11.74 days

Lama Siklus = 117.36/(2.74/day) = 42.8 days

Jumlah production runs per tahun = 1000/117.36 = 8.52

 ROBUSTNESS OF POQ
POQ is robust (like EOQ):
 Can adjust production run size.
 Useful even when parameters are uncertain.
 A large (20%) change in parameters or
operations will cause a small (~2%) change in
total costs.

Production run size (Q) and run length (Q/p) can be

adjusted to fit normal business cycles.
POQ ROBUSTNESS EXAMPLE
Set production run length to 14 days (2 weeks)
rather than 11.74 days (as was optimal).
Q/p = 14 days means that: Q = 10x14 = 140 units
 Q = 140 is 19% over optimal value of 117.4
units.
Cycle length = Q/d = 140/2.74 = 51.1 days.
Total cost = $1730.68
 Only 1.6% over minimum cost with optimal Q!
POQ & MULTIPLE PRODUCTS
POQ computes a production run size for a single
product.
For multiple products made on the same
equipment:
1. Compute POQ, run time, and cycle time for each
product.
2. Find a common cycle time for all products.
3. Recalculate run time and cycle time, so the common
cycle time is a multiple of each product’s cycle time.
4. Fit production runs into largest cycle time.
MULTIPLE PRODUCTS EXAMPLE
Example: Company makes 3 products: A, B, C
A: Optimal run time = 3 days; Optimal cycle time = 10 days
B: Optimal run time = 6 days; Optimal cycle time = 18 days
C: Optimal run time = 10 days; Optimal cycle time = 33 days

A A A
3 7 3 7 3 7

B B
6 12 6 12
C
10 23
 MULTIPLE PRODUCTS EXAMPLE
Optimal run time and cycle time:
A: Run time = 3 days; Cycle time = 10 days (1 run/10 days)
B: Run time = 6 days; Cycle time = 18 days (1 run/18 days)
C: Run time = 10 days; Cycle time = 33 days (1 run/33 days)

Use 30 days as a common cycle; adjust run & cycle times:

(disesuaikan proses dan siklusnya untuk 30hari)
A: Run time = 3 days; Cycle time = 10 days (3 runs/30 days)
B: Run time = 5 days; Cycle time = 15 days (2 runs/30 days)
C: Run time = 9 days; Cycle time = 30 days (1 run/30 days)

A B C A B A
3 5 9 3 5 3

2 days idle time

QUANTITY DISCOUNT MODEL
Variation of EOQ (not POQ).
Allows quantity discounts.
 Reduced price for purchasing larger quantities.
 Other EOQ assumptions apply.
Trade-off lower price to purchase item & increased
holding cost from more items.
Total cost must include annual purchase cost.
Total Cost = Order cost + Holding cost + Purchase cost
QUANTITY DISCOUNT MODEL - HOLDING
COST
Holding cost:
 Depends on price.
 Usually expressed as a % of price per unit time.
 20% of price per year, 2% of price per month, etc.
I = Holding cost percent of price per year
P = Price per unit
H = Holding cost = IP
 QUANTITY DISCOUNT EQUATIONS
D = Annual demand
S = Order cost per order
H = Holding (carrying) cost = IP
I = Inventory holding cost % per year
P = Price per unit

2 ×D ×S
Order Quantity = Q* =
IP
Annual purchase cost

Total Cost ($/yr)=

D Q
S+ IP + PD
Q 2
QUANTITY DISCOUNT MODEL
Q P IP
D = 1000/year
<500 $100 $20
S = $100/order
I = 20% per year 500-1000 $ 95 $19
 1000 $ 90 $18

To solve:
1. Find EOQ amount for each discount level.
2. If EOQ is not in range for discount level, adjust to the nearest
end of range.
3. Calculate total cost for each discount level.
4. Select lowest cost and corresponding Q.
QUANTITY DISCOUNT EXAMPLE
Q P IP
D = 1000/year
S = $100/order <500 $100 $20
I = 20% per year 500-1000 $ 95 $19
 1000 $ 90 $18
1. P = $100 IP = $20
EOQ = 100 in range!
Total Cost = 1,000 + 1,000 + 100,000 = $102,000/year

2. P = $95 IP = $19
EOQ = 102.6 not in range (500-1000)!
Adjust to Q = 500
Total Cost = 200 + 4,750 + 95,000 = $99,950/year
QUANTITY DISCOUNT EXAMPLE - CONT.
Q P IP
D = 1000/year
S = $100/order <500 $100 $20
I = 20% per year 500-1000 $ 95 $19
 1000 $ 90 $18
3. P = $90 IP = $18
EOQ = 105.4 not in range (>1000)!
Adjust to Q = 1000
Total Cost = 100 + 9,000 + 90,000 = $99,100/year

Q Total costs
<500 $102,100
500-1000 $ 99,950
 1000 $ 99,100 Lowest cost, so order 1000
STOCKOUTS
In basic EOQ model, demand and lead time are known
and constant, so there should never be a stockout.

If demand or lead time vary, then may have a stockout:

 Due to larger than expected demand.
 Due to longer than expected lead time.
 PROBABILISTIC MODELS

Inventory Level

Average demand

Reorder
Point
(ROP)

Place Receive Time

order Lead Time order
 PROBABILISTIC MODELS - STOCKOUT

Inventory Level

If demand is greater than

average - then stockout

Reorder
Point
(ROP)

Place Receive Time

order Lead Time order
 SAFETY STOCK TO REDUCE STOCKOUTS

Inventory Level

Safety stock
New ROP
Old ROP

Place Receive Time

order Lead Time order
SAFETY STOCK & SERVICE LEVEL
Safety stock is inventory held to protect against
stockout.
Service level = 1 - Probability of stockout
 Service level of 95% means 5% chance of
stockout.
 Higher service level means more safety stock.
More safety stock means higher ROP.
 ROP = Expected demand during lead time +
Safety stock
PROBABILISTIC MODELS
Demand follows normal distribution.
 d = Average demand rate per day.
  = Standard deviation of demand.

ROP = d L + safety stock

safety stock = ss = Z 
Z is from Standard Normal Table in Appendix
 EOQ-BASED MODELS
Order same amount every time = Q.
Time between orders varies.

ROP

Time between Time between 2nd Time

1st & 2nd order & 3rd order
FIXED PERIOD MODEL
Order at fixed intervals (e.g., every 2 weeks).
Order different amounts each time, based on amount
on hand.
 If large amount on hand, then order small amount.
 If small amount on hand, then order large amount.
Useful when vendors visit routinely.
 Example: P&G representative calls every 2 weeks.
FIXED PERIOD MODEL
Compute optimal order interval, T (equation is similar to
EOQ).
 For example, 27.35 days
Compute maximum inventory level, M (equation is
similar to ROP).
Adjust order interval to a convenient length.
 For example, one month.
 Then, adjust M correspondingly.
Order M - inventory on hand every T time units.
 FIXED PERIOD MODELS
Order at constant interval.
Order amount Q varies: M - amount on hand.

On-hand
for order 2

On-hand
for order 1

1st 2nd 3rd Time

order order order