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SUPPLY CHAIN TOOLS


Supply Chain Terminology

Ordering Cost

Carrying/Holding Cost

Purchasing Cost

Total Purchasing Cost

Economic Order Quantity (EOQ)

Reorder Point

Average Inventory

Break-Even Calculation

Customer Service Level

Mean Absolute Deviation

Mean Error

Total Annual Cost

 

ORDERING COST

Order Cost = (Annual Demand * Order Cost)/Order Quantity in Units

 

CARRYING/HOLDING COST

Carrying Cost = (Price per unit * Carrying cost percentage * Order Quantity in Units)/2

 

PURCHASING COSTS

Purchasing Cost = Annual Demand * Price per unit

 

TOTAL PURCHASING COST

Total cost = Ordering Cost + Carrying Cost + Purchasing Cost

 

ECONOMIC ORDER QUANTITY

  • Demand is known and is constant

  • No quantity discounts

REORDER POINT

Reorder point = Estimated Demand * Lead Time

 

AVERAGE INVENTORY

Average Inventory = EOQ/2 + safety stock

 

BREAK EVEN CALCULATION: There are three primary factors in the break even point: the selling price of the product, the variable cost and the fixed cost.  

Q= (Fixed Cost)/((Price per unit -Variable costs per unit)) at break even at Q

 

Break even point = (Fixed Cost)/(1-(Variable costs/Sales)

 

Break even occurs when: (Profit per unit * quantity) - (variable cost per unity * quantity) - fixed cost = 0

Break Even Analysis for Restaurant

 

ROI

Data Warehouse ROI

Calculating ROI for Business Intelligence Project

ROI Calculation

ROI Discussion Forum

Economic Justification - ROI

Some Strategies Go Beyond ROI

 

CUSTOMER SERVICE LEVEL

 

EXPONENTIAL SMOOTHING

 

MEAN ABSOLUTE DEVIATION

 

MEAN ERROR

 

TOTAL ANNUAL COST

 

TREND ENHANCEMENT

 

 

 

SEASONAL ENHANCEMENT

 

 

 

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