des presentation 2012

7/31/2019 Des Presentation 2012

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Lt Cdr Vaishno Chauhan

ECE - 02


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Optimisation of Re-Ordering Point Most companies implement lean production principles.

Minimisation of un-needed and in-efficient operations.(eg: excessive buffering, backorders etc.)

Re-ordering Point: Pont in time when order is placed for

refurbishment of stocks.

Proper defining of re-ordering point optimises operationalcosts.


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Arguably the most important part of materialmanagement in any industry.

Every industry requires Raw materials/Spareparts/Consumables etc. for production.

Early Orders of above items will increase the storage

costs.

Delayed orders may result in break in production lineresulting in overall delay.

Optimisation of Re-Ordering Point


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Definitions

Re-ordering Point : The point in time when the orderhas to be placed for a given item keeping in mindpurchasing, storing and backorder costs.

Logistic Lead time (LT) : Time taken from the pointa purchase order is submitted to the arrival of productsrelated to that order.

Demand Rate of Client (TT) : The speed at which theclient consumes the buffered products


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Definitions Purchasing Order Cost (Ce) : Fixed purchasing order

cost for each batch of product jointly ordered

Storage Cost (Cs) : Fixed cost per unit of time foreach product for being stored in buffer.

Backorder Cost (Cb) : Fixed cost assigned each time a

required product is not available in the buffer.

Backorder : An order that cannot be completed atthe current time due to lack of supply.


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Assumptions

The product comes in Q size of batches.

Logistic lead time is variable but known from historicaldata.

Demand rate of client is variable but known from historical

data.

The buffer has infinite capacity.


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Optimisation of Costs

The optimisation of re-ordering time will require the jointminimisation of the following costs :

The minimisation of total cost spent on submitting of purchaseorders (Cet).

The minimisation of the total storage cost for elements in the

buffer (Cst).

The minimisation of total backorder cost view unavailability ofelements in buffer (Cbt)


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Optimisation of Costs

The Costs to be minimised can be calculated as follows :

Cst = Nb x Cb Nb the no. of backorders

Cbt = Ne x Ce Ne the no. of purchasing orders

Cst = Csx (fori= 1 to m) Ts

Ts The amount of time each of the mproducts is stored in buffer.


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Stock Movement

Stock

Level

Time

Max Stock Level

Min Stock Level

Re ordering Level RP

Delivery time

BatchSizeQ


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Problem Formulation

The net cost to be optimised is a sum of Cst , Cet and Cbt.

The net cost is function of the batch size (Q) and the Re-

ordering point (RP).

Cst + Cet + Cbt = f(Q,RP)

Assuming Q to be fixed, the RP remains the only

decision variable. Therefore,

Cst + Cet + Cbt = f(RP)


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Reference : Optimisation of Reordering Pointsconsidering purchasing, storing and servicebreakdowncosts by Aitor Goti and Miguel Oetega


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