1
Choose a component
Annual demand is for a cluster of about 1,500 sites
2
The three inputs: D, S and H
Change anything and the whole lab recalculates
D: annual demand
Unit price (P)
Landed price per unit, before GST credit
Pack or lot size
What the supplier ships in
S: cost per order
H: holding cost per unit per year
3
The answer
4
Total cost is flat near the EOQ
Ordering cost, holding cost and total cost against order quantity
X axis: order quantity in units. The dashed teal line is the EOQ. The amber line is your own order quantity from the slider below.
Your order quantity
Show the numbers behind the chart
5
From EOQ to a real purchase order
Pack sizes, lead time and safety stock
Supplier lead time
Safety stock
Days of demand held as a buffer
6
Relax an assumption: the bulk discount
EOQ assumes no quantity discounts
Discount
Minimum order for the discount
7
All components, side by side
Click a row to load it. Rows use each item's default inputs, apart from the one you are editing.
8
Read-out and challenges
Challenge 1: freight doublesDiesel tanker freight rises 100%. Predict how the EOQ and the total cost move, then check.
Challenge 2: the shelf-life trapVRLA batteries age on the shelf. Triple the shelf-life cost and see what happens to the order size.
Challenge 3: is the discount worth it?A steel supplier offers 4% off for orders of 200 tonnes or more. Take it or not?