RSM370H1 Lecture Notes - Lecture 5: Carrying Cost, Stockout, Hockey Stick
Document Summary
To evaluate eoq for price in range qi to qi+1: to marginal product. Why sellers offer quantity discounts: coordination in supply chain. Lecture 5: managing inventories and uncertainty in a. October 10, 2018: inventory is a liability. Lean operations (less inventory) is more optimal, except there is a fixed setup cost of ordering inventory. Economies of scale due to quantity discounts: types of quantity discounts: Lot sized based (based on order size: all unit. Receive discount on each unit in order. Creates incentive to order more because lower marginal cost per unit. Will dump excess product in grey/secondary market. To find eoq, find minimum cost for each price range, then evaluate across each price range to find overall minimum: marginal unit. Less incentive to order beyond require units because discount only applies. Decrease supply chain costs for commodity products: retailer has no pricing power, setup cost for retailer usually less than setup cost for supplier.
