Special Inventory Models Supplement E To Accompany Krajewski

Special Inventory Models To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh

On-hand inventory Special Inventory Models Time Figure E. 1 To Accompany Krajewski & Ritzman

On-hand inventory Special Inventory Models Q Production quantity Time Figure E. 1 To Accompany

On-hand inventory Special Inventory Models Production quantity Q Demand during production interval p–d Time

On-hand inventory Special Inventory Models Production quantity Q Demand during production interval Imax Maximum

Special Inventory Models Economic Production Lot Size To Accompany Krajewski & Ritzman Operations Management:

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate =

Special Inventory Models Economic Production Lot Size Figure E. 2 To Accompany Krajewski &

Special Inventory Models Quantity Discounts To Accompany Krajewski & Ritzman Operations Management: Strategy and

Special Inventory Models Figure E. 3 Total cost (dollars) Quantity Discounts 0 100 200

Special Inventory Models Quantity Discounts Figure E. 3 Total cost (dollars) C for P

Special Inventory Models Quantity Discounts Figure E. 3 PD for P = $4. 00

Special Inventory Models Quantity Discounts Figure E. 3 EOQ 4. 00 EOQ 3. 50

Special Inventory Models Quantity Discounts Order Quantity 0 – 299 300 – 499 500

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300

Special Inventory Models Figure E. 4 To Accompany Krajewski & Ritzman Operations Management: Strategy

Special Inventory Models One-Period Decisions To Accompany Krajewski & Ritzman Operations Management: Strategy and

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0.

Special Inventory Models Figure E. 5 To Accompany Krajewski & Ritzman Operations Management: Strategy

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On-hand inventory Special Inventory Models Time Figure E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

On-hand inventory Special Inventory Models Q Production quantity Time Figure E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

On-hand inventory Special Inventory Models Production quantity Q Demand during production interval p–d Time Figure E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

On-hand inventory Special Inventory Models Production quantity Q Demand during production interval p–d Time Production and demand Demand only TBO Figure E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

On-hand inventory Special Inventory Models Production quantity Q Demand during production interval Imax Maximum inventory p–d Time Production and demand Demand only TBO Figure E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

On-hand inventory Special Inventory Models Production quantity Q Demand during production interval Imax Maximum inventory ( p–d Q Imax = (p – d) = Q p p p–d ) Time Production and demand Demand only TBO Figure E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

On-hand inventory Special Inventory Models Production quantity Q Demand during production interval Imax Maximum inventory Imax D C= (H) + (S) 2 Q p–d Time Production and demand Demand only TBO Figure E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

On-hand inventory Special Inventory Models Production quantity Q Demand during production interval Imax Maximum inventory ( Q p–d C =2 p p–d ) D + (S) Q Time Production and demand Demand only TBO Figure E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

On-hand inventory Special Inventory Models Production quantity Q Demand during production interval Imax Maximum inventory ELS = p–d 2 DS H p p–d Time Production and demand Demand only TBO Figure E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels ELS = 2 DS H Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year p p–d Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels ELS = 2(10, 500)($200) $0. 21 Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year 190 – 30 Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels ( ) Q p–d D C =2 (H ) + ( S) p Q Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels ( ) 10, 500 4873. 4 190 – 30 C= ($0. 21) + ($200) 4873. 4 2 190 Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels C = $430. 91 + $430. 91 Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels C = $861. 82 Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels C = $861. 82 ELS TBOELS = (350 days/year) D Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels C = $861. 82 4873. 4 TBOELS = (350 days/year) 10, 500 Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels C = $861. 82 TBOELS = 162. 4, or 162 days Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels C = $861. 82 ELS Production time = p TBOELS = 162. 4, or 162 days Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels C = $861. 82 4873. 4 Production time = 190 TBOELS = 162. 4, or 162 days Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Demand = 30 barrels/day Production rate = 190 barrels/day Annual demand = 10, 500 barrels Setup cost = $200 Annual holding cost = $0. 21/barrel Plant operates 350 days/year ELS = 4873. 4 barrels C = $861. 82 Production time = 25. 6, or 26 days TBOELS = 162. 4, or 162 days Example E. 1 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Economic Production Lot Size Figure E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Figure E. 3 Total cost (dollars) Quantity Discounts 0 100 200 Purchase quantity (Q) 300 (a) Total cost curves with purchased materials added To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E. 3 Total cost (dollars) C for P = $4. 00 C for P = $3. 50 C for P = $3. 00 0 100 200 Purchase quantity (Q) 300 (a) Total cost curves with purchased materials added To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E. 3 Total cost (dollars) C for P = $4. 00 C for P = $3. 50 C for P = $3. 00 First price break 0 Second price break 100 200 Purchase quantity (Q) 300 (a) Total cost curves with purchased materials added To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E. 3 Total cost (dollars) C for P = $4. 00 C for P = $3. 50 C for P = $3. 00 PD for P = $4. 00 First price break 0 PD for P = $3. 50 PD for P = $3. 00 Second price break 100 200 Purchase quantity (Q) 300 (a) Total cost curves with purchased materials added To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E. 3 PD for P = $4. 00 First price break 0 PD for P = $3. 50 PD for P = $3. 00 Total cost (dollars) C for P = $4. 00 C for P = $3. 50 C for P = $3. 00 Second price break 100 200 Purchase quantity (Q) 300 (a) Total cost curves with purchased materials added 0 100 200 Purchase quantity (Q) 300 (b) EOQs and price break quantities To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E. 3 PD for P = $4. 00 First price break 0 PD for P = $3. 50 PD for P = $3. 00 Total cost (dollars) C for P = $4. 00 C for P = $3. 50 C for P = $3. 00 First price break Second price break 100 200 Purchase quantity (Q) 300 (a) Total cost curves with purchased materials added 0 Second price break 100 200 Purchase quantity (Q) 300 (b) EOQs and price break quantities To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Figure E. 3 EOQ 4. 00 EOQ 3. 50 EOQ 3. 00 PD for P = $4. 00 First price break 0 PD for P = $3. 50 PD for P = $3. 00 Total cost (dollars) C for P = $4. 00 C for P = $3. 50 C for P = $3. 00 First price break Second price break 100 200 Purchase quantity (Q) 300 (a) Total cost curves with purchased materials added 0 Second price break 100 200 Purchase quantity (Q) 300 (b) EOQs and price break quantities To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity 0 – 299 300 – 499 500 or more Price per Unit $60. 00 $58. 80 $57. 00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more EOQ 57. 00 = $60. 00 $58. 80 $57. 00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price 2 DS H Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity 0 – 299 300 – 499 500 or more EOQ 57. 00 = Price per Unit $60. 00 $58. 80 $57. 00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price 2(936)(45) 0. 25(57. 00) Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 57. 00 = 77 units Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 EOQ 57. 00 = 77 units Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 58. 80 = 76 units Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 EOQ 57. 00 = 77 units Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 58. 80 = 76 units EOQ 60. 00 = 75 units Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 EOQ 57. 00 = 77 units C= Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 58. 80 = 76 units EOQ 60. 00 = 75 units D Q ( H) + (S) + PD Q 2 Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 EOQ 57. 00 = 77 units C 75 = Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 58. 80 = 76 units EOQ 60. 00 = 75 units 936 75 [(0. 25)($60. 00)] + ($45) + $60. 00(936) 75 2 Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 EOQ 57. 00 = 77 units Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 58. 80 = 76 units EOQ 60. 00 = 75 units C 75 = $57, 284 Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 EOQ 57. 00 = 77 units Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 58. 80 = 76 units EOQ 60. 00 = 75 units C 75 = $57, 284 936 300 C 300 = [(0. 25)($58. 80)] + ($45) + $58. 80(936) 300 2 Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 EOQ 57. 00 = 77 units Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 58. 80 = 76 units EOQ 60. 00 = 75 units C 75 = $57, 284 C 300 = $57, 382 Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 EOQ 57. 00 = 77 units Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 58. 80 = 76 units EOQ 60. 00 = 75 units C 75 = $57, 284 C 300 = $57, 382 936 500 C 500 = [(0. 25)($57. 00)] + ($45) + $57. 00(936) 500 2 Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models Quantity Discounts Order Quantity Price per Unit 0 – 299 300 – 499 500 or more $60. 00 $58. 80 $57. 00 EOQ 57. 00 = 77 units Annual demand = 936 units Ordering cost = $45 Holding cost = 25% of unit price EOQ 58. 80 = 76 units EOQ 60. 00 = 75 units C 75 = $57, 284 C 300 = $57, 382 C 300 = $56, 999 Example E. 2 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 10 20 D 30 40 50 For Q = D Payoff = p. Q Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 10 20 D 30 40 50 For Q = D Payoff = ($10)(10) Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 10 $100 20 D 30 40 50 For Q = D Payoff = $100 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 D 10 20 30 40 50 $100 $100 For Q ≤ D Payoff = p. Q Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 D 10 20 30 40 50 $100 $100 200 200 300 300 400 500 For Q ≤ D Payoff = p. Q Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 D 10 20 30 40 50 $100 $100 200 200 300 300 400 500 For Q > D Payoff = p. D – I(Q – D) Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 D 10 20 30 40 50 $100 $100 200 200 300 300 400 500 For Q > D Payoff = ($10)(30) – ($5)(40 – 30) Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 D 10 20 30 40 50 $100 $100 200 200 300 300 400 500 For Q > D Payoff = $250 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 D 10 20 30 40 50 $100 $100 200 200 300 300 250 400 500 For Q > D Payoff = $250 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 10 20 $100 50 200 0 150 – 50 100 – 100 50 D 30 40 50 $100 200 200 300 300 250 400 200 350 500 For Q > D Payoff = p. D – I(Q – D) Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Expected payoff = Loss per ornament 30 after season = $5 Q 10 20 30 40 50 10 20 $100 50 200 0 150 – 50 100 – 100 50 D 30 40 50 $100 200 200 300 300 250 400 200 350 500 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Expected payoff = 0. 2($0) Loss per ornament 30 after season = $5 Q 10 20 30 40 50 10 20 $100 50 200 0 150 – 50 100 – 100 50 D 30 40 50 $100 200 200 300 300 250 400 200 350 500 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Expected payoff = 0. 2($0) + 0. 3($150) Loss per ornament 30 after season = $5 Q 10 20 30 40 50 10 20 $100 50 200 0 150 – 50 100 – 100 50 D 30 40 50 $100 200 200 300 300 250 400 200 350 500 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Expected payoff = 0. 2($0) + 0. 3($150) + 0. 3($300) Loss per ornament 30 after season = $5 Q 10 20 30 40 50 10 20 $100 50 200 0 150 – 50 100 – 100 50 D 30 40 50 $100 200 200 300 300 250 400 200 350 500 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Expected payoff = 0. 2($0) + 0. 3($150) + 0. 3($300) Loss per ornament 30 after season = $5 + 0. 1($300) Q 10 20 30 40 50 10 20 $100 50 200 0 150 – 50 100 – 100 50 D 30 40 50 $100 200 200 300 300 250 400 200 350 500 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Expected payoff = $195 Loss per ornament 30 after season = $5 Q 10 20 30 40 50 10 20 $100 50 200 0 150 – 50 100 – 100 50 D 30 40 50 $100 200 200 300 300 250 400 200 350 500 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Expected payoff = $195 Loss per ornament 30 after season = $5 Q 10 20 30 40 50 10 20 $100 50 200 0 150 – 50 100 – 100 50 D 30 40 50 $100 200 200 300 300 250 400 200 350 500 Expected Payoff 195 Example E. 3 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Special Inventory Models One-Period Decisions Demand 10 20 30 40 50 Demand Probability 0. 2 0. 3 0. 1 Profit per ornament during season = $10 Loss per ornament after season = $5 Q 10 20 30 40 50 10 20 $100 50 200 0 150 – 50 100 – 100 50 D 30 40 50 $100 200 200 300 300 250 400 200 350 500 Expected Payoff $100 170 195 175 140 Figure E. 6 To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.