This document discusses inventory management techniques including just-in-time systems and backflush costing. It covers the economic order quantity model for balancing ordering and carrying costs, and identifies five categories of costs associated with goods for sale: purchasing costs, ordering costs, carrying costs, stockout costs, and quality costs. The document also discusses how to estimate relevant costs and the costs of prediction errors in the EOQ model.
17. Reorder Point
988
494
Weeks 1 2 3 4 5 6 7 8
Reorder
Point
Reorder
Point
This exhibit assumes that demand and purchase-order lead time are certain:
Demand = 247 tape packages/week Purchase-order lead time = 2 weeks
20 - 17
Lead Time
2 weeks
Lead Time
2 weeks