Inventory Planning & Control: Categories of Inventory Models • Deterministic vs. Probabilistic models • External vs. Internal demand • Ordering vs. Production • Continuous vs. Periodic review • Single-product vs. Multiple-product models.
Costs involved in Inventory Models • Ordering (Setup) cost • Unit purchasing (Production) cost • Holding (Carrying) cost • Shortage (Penalty) cost • Revenue (Selling price)
Basic EOQ Model • EOQ: Economic Order Quantity • Assumptions of EOQ models: • Demand is constant (unvarying ), expressed as annual demand (units per year ). • Models use continuous review, not periodic review. • Lead time is constant & known.