Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

Chapter 11 – Inventory Management and Stochastic Materials Management

Intended learning outcomes: Describe usage statistics, analyses, and classifications. Explain in detail the order point technique. Disclose how to calculate safety stock. Differentiate various batch or lot sizing techniques.

Section 11.3.1: The ROP (Re)-Order Point Technique

Intended learning outcomes: Present in detail characteristic data for the (re-)order point technique. Explain the (re-)order point calculation. Identify the criterion for the release of a production or procurement order.

Exercise: Get used to the order-point calculation by chosing different values for the parameters as well as the monthly gross requirements.

Section 11.3.3: Safety Stock Calculation with Continuous Demand

Intended learning outcomes: Describe different techniques for determining safety stock. Identify different patterns of the deviation of demand from forecast. Explain safety stock in relation to service level. Disclose the normal integral distribution function (service function) and the Poisson distribution integral function. Present the formula for safety stock.

Exercise: Get used to the influence of the safety stock on order point calculation by choosing different values for the service level.

Section 11.4.2: Optimum Batch Size and Optimum Length of Order Cycle: The Classic Economic Order Quantity (EOQ)

Intended learning outcomes: Explain economic order quantity (EOQ), variables for the EOQ formula and the EOQ formula. Describe the cost curves as a function of batch size. Present the optimum length of order cycle.

Exercise: Get used to the EOQ calculation by chosing different values for the parameters.