11. The Inventory Cycle Er.Sartaj Singh Bajwa Profile of Inventory Level Over Time Quantity on hand Q Receive order Place order Receive order Place order Receive order Lead time Reorder point Usage rate Time
12. Total Cost ACC = average number of units * carrying cost per unit per year AOC = (number of orders per year) * (ordering cost) Number Of Orders per year = annual demand(D) ordered quantity(Q) Average number of Units = Q/2 Er.Sartaj Singh Bajwa Annual carrying cost Annual ordering cost Total cost = + Q 2 H D Q S TC = +
13. Cost Minimization Goal Order Quantity (Q) The Total-Cost Curve is U-Shaped Ordering Costs Q O Annual Cost ( optimal order quantity) Er.Sartaj Singh Bajwa