Inventory Control Guide Page 19
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403.8 Economic Replenishment Interval
Up to now, we always considered that the lot size Q was the variable. We could also have
chosen T, the interval between two orders. Since Q and T are related by the formula: T D = Q,
this leads to the following cost formulation.
C(T) =
O / T + I D + H T D /2
Solving in T leads to the optimal replenishment interval T*.
2O
T* =
Economic Replenishment Interval:
HD
2OD
Q* =
Economic Order Quantity
H
Computing the optimal replenishment interval is more adequate when several different items
have to be ordered with a same order cost.
A first typical situation is when you order several products from a same supplier. Your
administration costs are usually independent of the mix and of the quantities which are
ordered. The transport cost (which could be the dominant part of the order cost) may also be
fixed.
A machine whose setup is valid for a family of products can also be seen as a fixed unique
cost for different products.
Method for computing an optimal policy :
1.
express all the costs in terms of Q or T
(you might have different curves);
2.
determine the minimum on each curve;
3.
check whether the minimum is feasible and
modify it if necessary;
4.
choose the best solution;
Prod 2100-2110
Inventory Control
18
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