Chapter 10: Notation

Single product
Cycle inventory = Q/2
Average flow time = (average inventory)/(average demand)
Holding cost H = hC
Annual material cost = CD
Annual order cost = (D/Q)S
Annual holding cost = (Q/2)H
Optimal lot size Q* = SQRT((2DS)/H)
Optimal order frequency n* = D/Q* = SQRT((DH)/2S)
Order cost given a desired lot size S = (H(Q2))/2D
Multiple products
Combined fixed order cost S* = S + ∑for each product i si
Annual order cost = nS*
Annual holding cost = ∑for each product i (DiHi)/(2n)
Optimal order frequency n* = SQRT((∑for each product i (DiHi))/(2S*))

Chapter 11: Formulas

Expected lead time demand DL = LD
Standard dev. of lead time demand L = SQRT(L)D
(when lead time is constant)
Standard dev. of lead time demand L = SQRT(L(D2) + D2(sL2))
(when lead time is uncertain)
Cycle service level CSL = F(ROP, DL, L)
Reorder point ROP = F-1(CSL, DL, L)
Safety inventory ss = ROP – DL also Fs-1(CSL)L
Fill rate fr = 1 – ESC/Q

Chapter 12: Formulas

Cost of overstocking Co = c–s
Cost of understocking Cu = p–c
Optimal cycle service level CSL* = (p – c)/(p – s) also Cu/(Cu + Co)
Optimal order size O* = F-1(CSL*, , )

Chapter 14: Formulas

Optimal cycle service level CSL* = (p – c)/(p – b)
(under buyback contract)
Optimal cycle service level CSL* = ((1 – )p – c)/((1 – )p – s)
(under revenue sharing contract)

Chapter 15: Formulas

Optimal price for each segment i pi = Ai/(2Bi) + c/2
Capacity for higher price segment CH = F-1(1 – (pL/pH), DH, H)