The document discusses inventory management concepts including types of inventory, the functions of inventory, inventory counting systems, lead time, holding costs, ordering costs, shortage costs, and the ABC classification system. It then covers the economic order quantity (EOQ) model for determining the optimal reorder quantity and explains how to calculate total annual inventory costs. Finally, it presents the economic production quantity (EPQ) model for situations where production meets consumption.

1. (Problem after bottleneck)
P. 276 in the book
Problem:
D= OT / CT
CT opt = 1.6
CTmin= 1.2
CTmax= t = 4.4
3. Number of stations:
Nmax= t / CTmin = 4.2 / 1.2 = 3.5 = 4
Nmin= 4.2 / 4.2 = 1
Nopt = 4.2 / 1.6 = 2.62 = 3
1.6 1.6 1.6
A 0.3 d. 1.2 F 0.6
C 0.4 H 0.5
e. 0.2
g 0.1
b 0.6
Idle = 0 idle = 0.4 idle = 0.2
Efficiency = Available time / Actual time = t / N.CT = 4.2 / 4.8 = 87.5%
If N= 1 Efficiency = 100%
If 4 Stations:
1.2 1.2 1.2 1.2
A 0.3 D 1.2 C 0.4 G 0.1
B 0.6 E 0.2 H 0.5
F 0.6 I 0.3
Idle = 0.3 Idle = 0 Idle = 0 Idle = 0.3
Efficiency: t / N.CT = 4.2 / 4x1.2 = 4.2 / 4.8 = 87.5%
6. Comment:
Compare the three solutions and choose the best number of stations.
D = OT / CT = 440 / 1.2 = 307 units
Therefore, the 3 stations is better because it produces enough units for the demanded quantity, the
4 stations will produce more (307) but we don’t need them
+++++++++++++++++++++++++++++++++++++
Assignment:
Hazel Case P. 36
Highline Fin Services P. 126
P. 2 & P.8 P. 118 & 119
P. 1, 11, 19 P. 229, 232, 233
P. 6 & 10 P. 314
Son Ltd p. 36
Prob. 2 & 3 P. 401

2. CHAPTER 6: Inventory
Management
Management = POLC
P= Plan = 5Ws: Why keep inventory?, what, where, when,
O= Organise = handling, logistics, shelving, shelf life,
Leading / directing of staff, suppliers,
C= Control inventory: this class
Inventory: A stock of goods
Independent demand: demand on my final products (from customers)
Dependent demand: demand on parts of products (from production department)
Types of inventory:
- Raw Materials and Purchased parts
- Work in progress
- Replacement parts, tools & supplies
- Good in transit
- Finished goods inventories
Function of Inventory:
Main purpose of inventory is to keep the production running  Continuity
Inventory Counting System:
Periodic System: Physical count each fiscal year
Perpetual System:
Universal bar code:
Lead time= time from order till receiving the order
Holding cost: cost u pay per unit annually to keep the product in house
Ordering / set up cost: cost of the purchasing process (from decision to buy till goods are received)
Shortage cost
ABC Classification System:
EOQ Model: Economic Optimal Quantity
Advised to manage critical inventory only.
Only 1 product, annual demand known, demand even each year, ……
Fig 11.2:
Reorder point depends on the lead time, the shorter the lead time the less the reorder point.
Total cost: Annual carrying cost + Annual ordering cost

3. TC = Q/2 H + D/Q S
S= set up cost (per cycle)
D= annual demand
H: avg annual total cost per unit
Q: Quantity produced each cycle
D/Q= number of cycles
D: from production
H: from inventory mgr (last year, total spending on inventory / Avg quantity of inventory available)
S: from purchasing
Q: we calculate it
Min TC: Q/2H = D/Q S
QH.Q = 2DS
Q2= 2DS/H
Q= sqrt 2DS/H
Let D= 1000units
S= LE40 / order
H= LE 2/unit
Q= sqrt 2x1000x40/2 = 200 units
Min TC: Q/2H = D/Q S
200/2(2) = 1000/200x40
200 = 200
TC= LE400 / year
ROP= 10 days = 40 units
OR accountants can simply calculate it as: H= 5%-10%
Economic Production Quantity (EPQ):
This model assumes we r producing what we consume! (Eg. Mardini (curtains) and its textile
factory).
Problem: P. 588
OT = 220 days / year
Usage = 50 couplings / day
Production = 200 couplings / day
Holding cost = $2 / coupling
Setup cost = $70 / order
Qo = sqrt 2DS/H x sqrt P/P-U
D = usage x operating time
= 50 x 220 = 11000.
Qo = sqrt 2DS/H x sqrt P/P-U
= sqrt 2x11000x20 / 2 x sqrt 200/150
= 1013

4. Number of runs per year: 11000/1013 = 10.858 = 11 runs
Qo / u = 1013/50 = 20 USE
Qo / p = 1013/200 = 5 PRODUCE Only
Qo = 20-5 = 15 days Use(?)
Imax = Qo (P-U/P) or 1-U/P