Term
| Basic Economic Order Quantity (EOQ) Model |
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Definition
| used to identify a fixed order fixed order size that will minimize the sum of the annual costs of holding inventory and ordering inventory |
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Term
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Definition
1. Only one product involved
2. Annual demand requirements are known
3. Demand is spread evenly throughout the year so that the demand rate is reasonably constant
4. Lead time does not vary
5. Each order is received in a single delivery
6. There are no quantity discounts |
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Term
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Definition
| H*(Q/2), Q=Order quantity, H=Holding(carrying) cost per unit |
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Term
| Number of orders per year |
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Definition
| D/Q, D= Annual Demand, Q=Order size |
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Term
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Definition
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Term
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Definition
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Term
| Economic Production Quantity (EPQ) Model Assumptions |
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Definition
1. Only one product involved
2. Annual demand requirements are known
3.The usage rate is constant
4. Usage occurs continually, but production occurs periodically
5.The production rate is constant
6. Lead time does not vary
7. There are no quantity discounts |
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