Calculating effective order quantities (also known as lot sizing) is really not all that difficult. Yet Economic Order Quantity (EOQ) and related cost-based lot sizing methods seem to be a complete mystery to many businesses. Sure, most people working in inventory management have heard of EOQ, but do they really understand it? The truth is, you will find that EOQ is a very logical and actually rather simple calculation. Once you understand the inner workings of cost-based lot sizing, you can use that knowledge to put together your own system that meets your specific business needs.
In Inventory Management Explained you will learn:
- Exactly what EOQ is, where it came from, and what all the numbers mean.
- Why EOQ and related calculations have gotton a bad rap over the years.
- How to determine what goes into Order Cost.
- How to determine what goes into Carrying Cost.
- When costs may not apply.
- How to set up a cost-based order quantity calculation in Excel that takes into account Quantity Discounts.
- Ways to deal with seasonality and trend in your order quantity calculations.
- How to use Period Order Quantity.
- An intro to the use of Optimization in lot sizing.
This is all done through spreadsheet examples combined with plain English explanations.