Key Equations
Total
inventory costs = total
carrying costs +
total
ordering costs
Total
carrying costs = a
order size
2 ba
carrying cost
per unit b
= a
Q
2 bC
Total
ordering costs = a number
of orders
ba
ordering cost
per order b
= a
S
Q bO
Total costs = a
Q
2 bC + a
S
Q bO
Q* = A
2SO
C
Inventory order point
(order new inventory
when the level of inventory
falls to the level)
= delivery@time
stock + safety
stock
Average inventory = EOQ
2
+ safety stock
TQ* = A
2SO
Cc