Managing Fixed-Quantity Inventory Systems

FQS

 FQS are used extensively in the retail industry

 The order quantity or lot size is the same

Inventory Position (IP)

 The process of triggering an order

 It is defined as the on-hand quantity (OH) plus any orders placed but which have not arrived
(called scheduled receipts or SR) minus any backorders (BO)
 IP=OH+SR-BO

Reorder point

 It is the value of the inventory that triggers a new order

Economic Order Quantity Model

 Is a classic economic model developed in the early 1900s that minimizes the total cost, which is
the sum of the inventory-holding cost and the ordering cost. Several key assumptions underlie
the quantitative model we will develop:
 Only a single item (SKU) is considered.
 The entire order quantity (Q) arrives in the inventory at one time.
 Only two types of costs are relevant-order/setup and inventory-holding costs.
 No stockouts are allowed.
 The demand for the item is constant and continuous over time.
 Lead time is constant.

Cycle inventory

 cycle inventory (also called order or lot size inventory) is inventory that results from
purchasing or producing in larger lots than are needed for immediate consumption or sale.
 Average cycle inventory = (Maximum inventory + Minimum inventory)/2 = (Q+0)/2=Q/2
If the average inventory during each cycle is Q/2, then the average inventory level over any
number of cycles is also Q/2.

( copy mo nalang yung formula ako na bahala sa explanation)