Operations Engineering and Management | Inventory Management Calculator
Operations Engineering and Management
By: Seyed Iravani
Chapters 9 and 10 - Computing Optimal Order Size and Reorder Point for Continuous and Periodic Review Inventory Systems
Businesses need to decide how much inventory to hold to avoid excess inventory costs while providing the right level of service to customers. The total costs are made up of the inventory cost, the order setup cost, and the backorder/lost sales cost. The service level is measured either by the cycle service level (the probability of not facing shortage in an order cycle) or fill rate (the fraction of demand that is satisfied immediately). This calculator assumes that the demand during lead time is normally distributed and the chance of having more than one outstanding order is negligible.
General Configuration
If the demand that faces shortage can be satisfied when the item becomes available, use Backorder. If not, use Lost Sales.
If orders can be placed at any time, use Continuous. If orders can be placed only at fixed intervals use Periodic.
The number of periods in a year. For example, enter 52 for weeks.
(ex. 52 for weeks)
Demand per Period
The average amount of product demand in a period.
units/period
The standard deviation of product demand in a period.
units/period
Leadtime Length
The average leadtime for a product.
periods
The standard deviation of the leadtime for a product.
periods
Costs
The purchase price of the item.
$/unit
The cost of placing an order, including shipment, transportation, etc.
$/order
Either the cost of a backorder or loss of profit, future sales, and goodwill.
$/unit
The cost of holding $1 of inventory for a year.
%
Goal
The objective of your policy, whether it's minimizing cost or achieving a service level.
The service level you want to achieve, whether a cycle service level or fill rate.
%
Review Period Details
The number of periods in between inventory reviews.
