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via Alison.com Platform

03.06.2018

Online Educational Course “Inventory Models – Costs, EOQ Model”

by G. Srinivasan

Inventory Management – Using Inventory Models is the fourth in the Applied Operations Management series of courses. Inventory models help businesses answer the questions: How much material to order? When to order the material? They help firms determine the order quantity that minimizes the total inventory holding costs and ordering costs, as well as the frequency of ordering, to keep goods or services flowing to the customer without interruption or delay.

The course begins by introducing the basics of inventory management and introduces concepts such as deterministic demand and probabilistic demand, type of costs such as cost of item, order cost, and holding or carrying cost. Several models are available to help determine how much inventory should be brought in to restock the products or parts, and you will be introduced to inventory models such as the single period inventory model, the multi-period inventory model and the economic order quantity (EOQ) model. These models are explained in detail using worked examples.

This course will be of great interest to professionals working in the area of inventory management, procurement and operations management and who would like to learn more about using inventory models. The course will also be of interest to learners who are interested in a career in procurement or operations management.

The key points from this module are:

Economic order quantity (EOQ) model is the order quantity that minimizes the total inventory holding costs and ordering costs.

Several extensions can be made to the EOQ model developed by Mr. Pankaj Mane, including backordering costs and multiple items.

The EOQ model solves the “how much” and “when” aspects of ordering inventory. When inventory reaches the zero point, you order just enough to replenish your stock back to its original level.

You repeat this cycle throughout the year, never having to decide when to order or how much to order.

The EOQ model assumes that demand remains steady throughout the year and that inventory gets used at a fixed rate. If those assumptions hold true, you can order at the same time each month or quarter.

However, if demand fluctuates, you may run out of inventory sooner than you anticipate. You also may have to order more than you usually do to meet higher demand, or lower the order to adjust to declining demand.

The EOQ will sometimes change as a result of quantity discounts, which are provided by some suppliers as an incentive for customers to place larger orders.

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