From the course: Excel Supply Chain Analysis: Solving Inventory Problems
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Calculate reorder points for inventory policies that allow back orders - Microsoft Excel Tutorial
From the course: Excel Supply Chain Analysis: Solving Inventory Problems
Calculate reorder points for inventory policies that allow back orders
- [Instructor] In the previous movie, we calculated the economic order quantity for an inventory policy that allows back orders. In this movie, we will calculate the point at which you should make that order. My sample file is 02_04_ReorderPoint, and that's an Excel file. You can find in the chapter two folder of the exercise files collection. I have left in my calculations from the previous movie in this workbook. You see that we have the base EOQ, which is the economic order quantity when back orders are not allowed. After we calculated that value, we use the cost of shortage and the cost of excess, and found the square root of the inverse of the critical ratio to calculate the EOQ with back orders. And you can see that value is just over 277. So now we know the EOQ with back orders, but the question is, how far do we want our inventory level to go into the negative before we reorder?…
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