EOQ

MODIFIED

Assumption of EOQ Uniform demand over time Replenishment is immediate Lead time is constant Fixed price Procurement cost is fixed Carrying costs fixed & can be expressed in %age Procurement possible in desired lots No time deterioration

Reality Variations in consumption Fluctuating time Lead time never constant Discounts, variations Varies with value of order & item nature Varies with item nature Limits in lot size, packaging, govt. restrictions Shelf life, pilferage, damages

EOQ 1. Difficulties in follow-up

Situations needing modifications

MODIFIED

EOQ 450 Nos & Monthly consumption 500 Nos Modify the OQ to 500 2. Monthly orders Large order with staggered delivery schedule 3. Minimum Qty condition EOQ < Min Q, then modify the order quantity = min Q 4. Suppliers Lead time a) Order Q = Lead time consumption or > OR b) Match placement of orders with arrival of lots OR c) Place orders at EOQ consumption intervals allowing needed lead time Exp: Lead time 3 m., consumption 200 Nos pm, EOQ 100 then place order for 100 Nos, every 15 days starting first order 3 months in advance.

5. Govt restrictions imports, state restrictions, storage regulations Follow the rules
6. Packing Order in multiples of packing lots 7. Seasonal Items

8. Shelf Life
9. Bulk / space restriction 10. Discount Structures 11. Market conditions 12. Inflationary trends