Advantages Of Linear Programming Models

Reduced need for higher capacity at the supplier. This would be reduced because suppliers would not need to size their operations to deliver on the “one shot large volume order” and would be able to space these in time with orders at

In the Fixed-Order Quantity Model (Q-Model), every time that the stocks reach a specific level an order is placed. Q-Model requests a constant monitoring in inventory levels. The risk of stock out only occurs during the lead time, thus the safety stock is less than in P-Model for the same service level. Reorders are placed when stocks reach (R), and the safety stock that must be reordered is:

ME = Profitability and/or decision analysis is applied appropriately in the analysis of at least two strategic alternatives, OR at least two relevant performance management concepts or

Capacity Planning- It is essential to accurately predict what products people are willing to purchase. If there is not enough of something people will be angry and if there is too much of another thing you are wasting money as a company.

EOQ as described everywhere is “the order quantity that minimizes total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models”. This model uses the following assumptions:

With the same inventory levels, whether in a store or in a warehouse, the warehouse can drive the cost of this up, beyond that of in a store. Service charges are a cause of this inflated cost. The advantage the warehouse option has here, is there is plenty of space available to keep extra inventory versus what a store can hold, to guarantee a cushion of product in order to fill any customer demands. Also, centralizing stock allows easier monitoring of the stock levels for different products and due to service levels implemented in a warehouse, inventory checks can be easier in the warehouse.

My inventory control procedures provided both increased revenues and cost savings. Quite simply, I ordered adequate levels of products which were in high demand, I was able to better meet customers’ needs, and my revenues increased. The cost savings I experienced as a result of my inventory control procedures were a bit more complex. First, in establishing a routine schedule for ordering, I was able to reap the benefits of lower shipping costs. Because I had a routine schedule, I could

Economic Order Quantity (EOQ): Our warehouse utilization has increased from 65% to 90%, it is apparent a significant quantity of our money is being tied up in inventory. The EOQ calculation shows the lot size that will minimize total annual inventory holding and inventory costs.

Having a min max inventory system with lead times built into the system will increase the replenishment of inventory and avoid being out of stock. This is great for the

The following explanation is structured based on the decision making model: Define the problem (A), Analyze Alternatives (B), Make a Choice (C), Take Action (D), Evaluate Result (E). For each of the steps in the decision-making process, I will list each situation in order (1-4) stated in Case 9, W-115.

1) EOQ/ROP system is essentially a reactive approach; this approach gives only an order quantity, it does not suggest ways to reduce the inventory.

The company also reduces inventory management cost by maintaining low inventory or just-in-time inventory which is a good technique to gain competitive advantage.

The difficulties that were accompanied with this approach led to deviation from the rational model. Complexity of modern organizations and the limited cognitive ability of decision makers were most influencing factors in the deviation . The decision makers were unable to operate under perfect rationality conditions. The information about a decision was mostly unavailable or unclear, and open to different interpretations. Also, the criteria of evaluating alternative solutions were not agreed upon. It also required very long time and a lot of energy of the decision makers to pursue a maximizing outcome. These constrains led to a conclusion that the absolute rational model is unreachable.

Axsäter, 2006). In this area only large scale multi-national companies have set a number of

1. Comparison of the decision factors created with the criteria established to arrive at a decision