The document discusses the economic order quantity (EOQ) model, which is a technique used in inventory control to minimize total inventory costs. The EOQ model determines the optimal order quantity that balances ordering costs and carrying costs. It assumes constant demand, lead times, and costs. The mathematical EOQ formula finds the order quantity that minimizes total annual costs by balancing the ordering cost per period with the carrying cost per period. An example calculates the EOQ of 5,000 units with an ordering cost of $30 and carrying cost of $6 per unit.

1. Economic order quantity ‘ EOQ’ 11/06/09 Maroof Hussain Sabri

11. Graphic presentation of ‘Q’ Model E O Q RE-ORDER LEVEL BUFFER STOCK MAXIMUM LEVEL MINIMUM LEVEL E G I N V E N T O R Y TIME PERIOD K A B C D

14. Example: Q. Calculate the economic order quantity if annual demand for the product is 5,000 unit. The ordering cost is Rs 30 per order and holding cost is Rs 6/- per unit per annual. Sol:- Given R=5000 unit Cp= Rs. 30 Ch=Rs. 6 Now, _____ EOQ = J ( 2RCp/ CH) _____ = J(2*5000*30/6) ______ = J 5000 = 224 or 22.5 units. 11/06/09 XIDAS, Jabalpur

18. Graphical Presentation of ‘P’ Model Q U A L I T Y UNITS OF STOCK Replenishment level R1 15 days Y1 Y2 Y3 R3 R1 G S3 R2 S2 S1 S2 R2 R3 S3