Supply Chain Formula
Supply Chain Formula: 1. Economic Order Quantity (EOQ): EOQ = sqrt((2DS)/H) - Application: Determines the optimal order quantity that minimizes inventory holding. - D: Demand rate (units per time period) - S: Setup or ordering cost per purchase order - H: Holding cost per unit per time period 2. Reorder Point (ROP): ROP = DLT - Application: Identifies the inventory level at which a replenishment order should be placed to avoid stockouts. - D: Average daily demand (units per time period) - L: Lead time (time period) - T: Safety stock factor (to account for demand variability) 3. Safety Stock: Safety Stock = (Z * sigma * sqrt(LT)) + Buffer Stock - Application: Accounts for demand variability and uncertainty during the lead time to protect against stockouts. - Z: Z-score for desired service level (corresponds to a specific service level percentage) - sigma: Standard deviation of demand (units) - LT: Lead time (time period) 4. Total Cost of Ownership (TCO): TCO = FC + VC + IC - Appli...