Inventory Management and Risk Pooling Xiaohong Pang Automation Department Shanghai Jiaotong University
Inventory Management and Risk Pooling Xiaohong Pang Automation Department Shanghai Jiaotong University
Key Insights from this Model The optimal order quantity is not necessarily equal to average forecast demand. The optimal quantity depends on the relationship between marginal profit and marginal cost. As order quantity increases,average profit first increases,and then decreases. As production quantity increases,risk increases.In other words,the probability of large gains and of large losses increases
Key Insights from this Model The optimal order quantity is not necessarily equal to average forecast demand. The optimal quantity depends on the relationship between marginal profit and marginal cost. As order quantity increases, average profit first increases, and then decreases. As production quantity increases, risk increases. In other words, the probability of large gains and of large losses increases
Topics Today The Effect of Demand Uncertainty .Continuous Review Policy .Periodic Review Policy .Risk Pooling
Topics Today
A Multi-Period Inventory Model Often,there are multiple reorder opportunities. ■ Consider a central distribution facility which orders from a manufacturer and delivers to retailers.The distributor periodically places orders to replenish its inventory
A Multi-Period Inventory Model Often, there are multiple reorder opportunities. Consider a central distribution facility which orders from a manufacturer and delivers to retailers. The distributor periodically places orders to replenish its inventory
Why the DC holds inventory? The DC holds inventory in order to: Satisfy demand during lead time Protect against demand uncertainty Balance fixed costs and holding costs
Why the DC holds inventory? The DC holds inventory in order to: Satisfy demand during lead time Protect against demand uncertainty Balance fixed costs and holding costs