BUAD 331 Study Guide - Final Guide: Economic Order Quantity, Kroger, Emor
Document Summary
Anticipatory fulfillment (slide 4: most businesses still do this today, demand is supported by deploying inventory in anticipation of projected sales levels and location. You basically guess (normally wrong) how large demand will be and produce for that, hoping you are close to being right: push system. Balance of setup costs and inventory carrying costs- eoq is the batch size you should order: it is the least cost you can have in your system, it ignores variance. Na ve sawtooth inventory model (slide 6: quantity level is eoq, na ve because it ignores variance and assumes you sell the same amount of x every day. Conventional approach to fulfilling orders: assumes lead time is constant, rop ( reorder point)= lt* daily demand. Amount ordered is based on eoq: problems occur when demand is not stable (because rop=lt*dd), so then you either have too much or too little inventory!
