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Multi Product Economic Order Quantity with Joint Ordering and no Stock Outs
Engineering and Construction
Pages 10 (2510 words)
Engineering & Construction: Multi Product Economic Order Quantity with Joint Ordering and no Stock Outs Introduction This paper seeks to study inventory management policy that can help minimize total annual inventory cost of the products to be warehoused in an engineering & construction company setup, with a particular reference to developing a suitable system for multi-product economic order quantity with a focus on joint ordering policy and minimizing stock outs.
Inventory Management Policy Inventory Cost Various elements of inventory cost include ordering cost, carrying cost, purchasing cost and stock-outs cost. Variation in ordering quantity results into variation in cost. The important elements of ordering cost includes preparation and Cost of tendering or bidding, negotiations with the suppliers, selection of suppliers and placement of purchase order. Ordering cost per unit comes down with increase in quantity. Ordering – Cost Curve Rationale for inclusion in Joint Ordering We have considered cement, paint and tiles for joint ordering purposes. Once the frame of the building is in place, the need for cement, tiles and paint arises, though use of cement is involved in all stages of construction. Plastering of walls with cement, flooring and painting work are simultaneously done at different parts of the building in an alternative manner in view of curing. Therefore, clubbing these materials for joint ordering is eminently justified since mostly suppliers of building materials deal with all these materials under one roof. ...
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