Annual demand, D

Unit cost per engine, C

Order cost per lot, S
Holding cost per year as a fraction of unit cost, h

=
=
=
=

109500
500
1000
0.2

Optimal order size, Q

=
=

(2DS/hC)
1480

Cycle inventory

=
=

Q/2

Number of orders per year

=
=

D/Q
73.98649

Annual ordering and holding cost

=
=

DS/Q + QhC/2
147986.5

Average flow time

=
=

Q/2D
0.006758 year

740

Desired lot size, Q

Annual demand, D
Unit cost per engine, C
Holding cost per year as a fraction of unit cost, h
Order cost per lot, S

=
=
=
=
=

100
109500
500
0.2
1000

Annual ordering and holding cost

=
=
=

DS/Q + QhC/2
1100000
952013.5

=
=

hCQ^2/2D
4.56621

Change in inventory cost

Desired order cost, S

Current Strategy
Demand per year, D
Fixed cost / order, S
Unit cost, C
Holding cost, h
Optimal order size, Q
Cycle inventory
Annual holding cost
Order frequency, n
Annual ordering cost
Average flow time / year
Annual cost
Total cost

A
240000
500
5
0.2
15492
7746
7746
15.49
7745.93
0.03
15491.93
23677.25

B
30000
500
4
0.2
6124
3062
2449.6
4.90
2449.38
0.10
4898.98

C
10800
500
5
0.2
3287
1643.5
1643.5
3.29
1642.84
0.15
3286.34

Product ordered and delivered jointly

Demand per year, D
Order frequency, n
Optimal order size, Q
Cycle inventory
Annual holding cost
Annual ordering cost
Average flow time / year
Annual cost
Total cost

Combined fixed order cost, S

Optimal order frequency, n

A
B
C
240000
30000
10800
14.01
14.01
14.01
17130.38 2141.297 770.8669
8565.188 1070.648 385.4335
8565.188 856.5188 385.4335
9807.14
0.00
0.00
0.04
0.04
0.04
18372.33 856.52
385.43
19614.28

=
=

700
14.0102

Lot sizes and costs for ordering using heuristics

A
B
C
240000
30000
10800
Demand per year, D
14.37
10.16
6.82
Order frequency, n
16698.08 2951.831 1584.119
Optimal order size, Q
8349.04 1475.916 792.0594
Cycle inventory
8349.04 1180.733 792.0594
Annual holding cost
8623.75 1016.32
681.77
Annual ordering cost
0.03
0.05
0.07
Average flow time / year
16972.79 2197.05 1473.83
Annual cost
Total cost
20643.66

nA'
nB'
nC'
nB''
nC''
mB
mC
n
nA
nB
nC

=
=
=
=
=
=
=
=
=
=
=

15.49193
4.898979
3.286335
10.95445
7.348469
1.414214
2.108185
14.37291
14.37291
10.16318
6.81767

Current Strategy
Demand per month, D
Fixed cost / order, S + s
Unit cost, C
Holding cost, h
Optimal order size, Q
Cycle inventory
Annual holding cost
Order frequency, n
Annual ordering cost
Average flow time / month
Annual cost
Total cost / month

A
B
C
20000
2500
900
500
500
500
5
4
5
0.01666667 0.0166667 0.0166667
15492
6124
3287
7746
3062
1643.5
645.5
204.13333 136.95833
1.29
0.41
0.27
645.49
204.11
136.90
0.39
1.22
1.83
1290.99
408.25
273.86
1973.10

Product ordered and delivered jointly

Demand per month, D
Order frequency, n
Optimal order size, Q
Cycle inventory
Annual holding cost
Annual ordering cost
Average flow time / month
Annual cost
Total cost / month

Combined fixed order cost, S

Optimal order frequency, n

A
B
C
20000
2500
900
1.17
1.17
1.17
17130.38 2141.297 770.8669
8565.188 1070.648 385.4335
713.7657 71.37657 32.11945
817.26
0.00
0.00
0.43
0.43
0.43
1531.03
71.38
32.12
1634.52

=
=

700
1.167517

Lot sizes and costs for ordering using heuristics

A
B
C
20000
2500
900
Demand per month, D
1.20
0.85
0.57
Order frequency, n
16698.08 2951.831 1584.119
Optimal order size, Q
8349.04 1475.916 792.0594
Cycle inventory
695.7533 98.39438 66.00495
Annual holding cost
718.65
84.69
56.81
Annual ordering cost
0.42
0.59
0.88
Average flow time / month
1414.40
183.09
122.82
Annual cost
Total cost / month
1720.31

nA'
nB'
nC'
nB''
nC''
mB
mC
n
nA
nB
nC

=
=
=
=
=
=
=
=
=
=
=

1.290994
0.408248
0.273861
0.912871
0.612372
1.414214
2.108185
1.197743
1.197743
0.846932
0.568139

Monthly demand, D
Order cost per lot, S
Holding cost per month as a fraction of unit cost, h
Order Quantity

=
=
=

20000
400
0.016667

Discount unit price

0
1
20000
0.98
40000
0.96

q0
q1
q2
C0
C1
C2
Q0
Q1
Q2

=
=
=
=
=
=
=
=
=

0
20000
40000
1
0.98
0.96
30983.87
31298.43
31622.78

We ignore I = 0 and 1, because Q0>q0 and q1

Q2

40000

Total annual cost

19720

Average demand per week, D

Standard deviation of weekly demand, D
Average lead time for replenishment, L
Desired cycle service level

=
=
=
=

300
200
2
0.95

Average demand during lead time, DL

Standard deviation of demand during lead time, L

=
=
=

600
LD
282.8427

Safety inventory, ss
Reorder point, ROP

=
=
=

465.2349
ss + DL
1065.235
1065.235

weeks

Directly

Average demand per week, D

Standard deviation of weekly demand, D
Average lead time for replenishment, L
Desired cycle service level
Review interval, T

=
=
=
=
=

300
200
2
0.95
3

Mean demand during T + L periods, DT+L

=
=
=
=
=

(T+L)D
1500
(T+L)D
447.2136
735.6009

=
=

DT+L + ss
2235.601

Standard deviation of demand during lead time, L+T

Safety inventory, ss
Order upto Level, OUL

T+L + ss

weeks
weeks

CSL
=
0.95
L
=
8 weeks
Independent ss in different countries
Country
Mean Demand, D
Standard deviation,D
L
France
3000
2000
5656.9
Germany
4000
2200
6222.5
Spain
2000
1400
3959.8
Italy
2500
1600
4525.5
Portugal
1000
800
2262.7
UK
4000
2400
6788.2
Total

ss in Taiwan
Country
Mean
France
Germany
Spain
Italy
Portugal
UK

Demand, D
3000
4000
2000
2500
1000
4000
16500

Standard deviation,D
L
2000
5656.9
2200
6222.5
1400
3959.8
1600
4525.5
800
2262.7
2400
6788.2
4445.2221541786 12573.0

ss
9304.7
10235.2
6513.3
7443.8
3721.9
11165.6
48384.4

ss
9304.7
10235.2
6513.3
7443.8
3721.9
11165.6
20680.7

ROP
33304.7
42235.2
22513.3
27443.8
11721.9
43165.6
180384.4

ROP
33304.7
42235.2
22513.3
27443.8
11721.9
43165.6
152680.7

Demand, DA
Standard deviation, A
Revenue from segment A, pA
Revenue from segment B, pB
Total capacity per day

=
=
=
=
=

250
100
10
5
1000

Capacity to be reserved for segment A

250

Mean for spot market,

Standard deviation for spot market,
Bulk contract cost, cB
Spot contract cost, cs
Total capacity
Optimal value of p

=
=
=
=
=
=
=

60000
20000
0.1
0.13
200000
(cS-cB)/cS
0.230769

Optimal amount to be purchased using the spot contract, Q

45273.68

Quantity at the beginning of the season, Q

Costs per unit, C
First month
Second month
Third month

=
=
d1
d2
d3

5000
40
=
=
=

2000-10p1
2000-20p2
2000-30p3

Max p1(20000-10p1) + p2(20000-20p2) + p3(20000-30p3)

subjected to
(20000-10p1) + (20000-20p2) + (20000-30p3) 5000
(20000-10p1), (20000-20p2), (20000-30p3) 0
Fixed price for entire season
Period
1
2
3
Total

Price
50.0
50.0
50.0

Demand
1500
1000
500
3000

Revenue
75000
50000
25000
150000

Period
1
2
3
Total

Price
100
50
33.33333

Demand
1000
1000
1000
3000

Revenue
100000
50000
33333.33
183333.3

Period
1
2
3
Total

Price
120
120
120.00

Demand
800
800
800
2400

Revenue
96000
96000
96000
288000

Dynamic pricing

Optimal quantity

000-10p1
000-20p2
000-30p3

Profit
64000
64000
64000
192000