CHAPTER. 11. Inventory Management. Customers, demand centers sinks. Field Warehouses: stocking points. Sources: plants vendors ports. Regional Warehouses: stocking points. Supply. Inventory & warehousing costs. Production/ purchase costs. Transportation costs.
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Independent demand is uncertain. Dependent demand is certain.
Inventory: a stock or store of goods
Physical count of items made at periodic intervals
The Total-Cost Curve is U-Shaped
Order Quantity (Q)
(optimal order quantity)
Using calculus, we take the derivative of the total cost function and set the derivative (slope) equal to zero and solve for Q.
The total cost curve reaches its minimum where the carrying and ordering costs are equal.