Additional Issues in Inventory Management Operations Management Assignment Help

Additional Issues in Inventory Management

Determining Realistic Costs

Determining Realistic Costs
lost inventory models give optimal solutions so long as the conditions of the system meet he constraints and/or assumptions of the model. While this is easy to state. it is difficult to implement. Obtaining actual order. setup. carrying. and shortage costs is often difficultvmetimes impose .ible. Part of the problem occurs because accounting data are usually average. areas to determine the proper lot sizes we need the marginal costs. Exhibit 16.10 prepares the assumed smoothly a sending cost to the more realistic actual cost. For example.  J Corporate buyer is a salaried per-en. The marginal cost for the buyer's labor toC additional order, up to a full workload i', zero. When another buyer i•..hired. it is a step toll. ( ln theory. the marginal co-t of the order that caused hiring the new buyer is the for the additional buy cr.i The same problem occur, in determining carrying costs. Warehouse costs. for example. , close to zero if empty 'LOr.t~'l' are.r- are available. Also. most companies only can te actual carrying costs, <since the~ Include obsolescence (a gues . at be ..•t), cost of I ( which depends on internal money a available, alternate investment opportunities. and 01 new capital). and in France  ts which may range from zero if current

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insurance premiums cover more than the assets on hand, to the cost of a new policy l. It i therefore important that we take these circumstances into consideration when applying the inventory models presented in this chapter.

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