Input

Cells are shaded

Annual Demand
12,000
Ordering Cost
50.00
Unit Cost
25.00
Unit holding cost per year (two options)
(i) in s per year
(ii) as % of unit cost
30.0%
Unit holding cost per year =
7.50
Output
EOQ
400.00
No. of Orders/Year
30.0
Total cost 303,000

100
<-------- Graph Table --------->
Order
size

100
200
300
400
500
600
700
800

Holding
cost

Ordering
cost

Annual
cost

375
6,000 6,375
750
3,000 3,750
1,125 2,000 3,125
1,500 1,500 3,000
1,875 1,200 3,075
2,250 1,000 3,250
2,625
857
3,482
3,000
750
3,750
Plot cell range F5:I14

EOQ graph

7,000

Annual cost

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Example 9.1 - An EOQ Model for Bedrock's Problem

6,000

5,000

4,000

3,000

2,000

1,000

0
100

200

300

Holding cost

400

Order quantity
Ordering cost

Figure 8.4 Economic order quantity (EOQ) model.

(Note that this model has been modified)

500

600

700

Annual cost

800

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Example 9.2 - The PROQ Model and Solution to Gizmo's Problem.
Input

Output

Annual Demand
Setup Cost
Unit Cost
Annual production rate
Unit holding cost per year (two options)
(i) in s per year
(ii) as % of unit cost
Annual unit holding cost =

2,100
450.00
30.00
2,500

PROQ
Production run time,Ro (in weeks)
Optimal cycle time, To (in weeks)

1403.12
29.18
34.74
224.5
673
673
64,347

Maximum inventory level

Annual holding cost
Annual setup cost
Total cost

Cell
E10
E11
E12
E13
E14
E15
E16
E17
E18

20.0%
6.00

Formula
IF(E9="",E8,E5*E9)
IF(E10=0,"Holding cost cannot be zero!","")
SQRT(2*E3*E4/E10)*SQRT(E6/(E6 - E3))
52*E12/E6
52*E12/E3
E12*(E6 - E3)/E6
0.5*E10*E15
E3*E4/E12
E16 + E17 + E3*E5

Figure 8.5 Production order quantity (PROQ) model.

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Figure 8.5 Production order quantity (PROQ) model.

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Figure 8.5 Production order quantity (PROQ) model.

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Example 9.3 - A Quantity Discount Model for the Wheelie Company
Input Annual Demand
Ordering Cost
Unit holding cost per year (two options)
(i) in s per year
(ii) as % of unit cost

1,500
80.00

User input cells

are shaded

30.0%

DISCOUNT TABLE
Unit Cost =
Minimum discount quantity, Mini =
Annual unit holding cost =

10.00
0
3.00

8.00
1000
2.40

6.00
2000
1.80

Qi =
Adjusted order quantities =
Total costs =

282.8
282.8
15,849

316.2
1000.0
13,320

365.1
2000.0
10,860

Minimum total cost is

Optimal order quantity is
Cycle time is

10,860
2000.0
69.3

Output

Cell
F11
F12
F13
F14
F15
F17
H17
F18
F19

2
weeks

Formula
IF($G6="",$G7*F9,$G6)
IF(F11=0,"Holding cost cannot be zero!","")
SQRT(2*$G3*$G4/F11)
IF(F13>F10,F13,F10)
$G3*$G4/F14 + 0.5*F14*F11 + $G3*F9
MIN(F15:H15)
MATCH(F17,F15:H15,0) - 1
OFFSET(F18,-4,H17)
52*F18/G3

Figure 8.6 Quantity discount model for the Wheelie Company.

Copied to
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G13:H13
G14:H14
G15:H15

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Example 9.4 - A Delivery Charge Model for the Farmers' Co-operative
Input Daily Demand (in tonnes)
Unit Cost
Unit holding cost per day (two options)
(i) in s per day
(ii) as % of unit cost
DELIVERY TABLE
Reorder Cost =
Maximum delivery quantity, Maxi =

Cell
F13
F14
F15
F19

User input cells

are shaded

1.50

80.00
10
1.50

130.00
20
1.50

180.00
30
1.50

Adjusted order quantities =

Total costs =

17.9
10.0
332

22.8
20.0
335

26.8
26.8
340

Minimum total cost is

Optimal order quantity is
Cycle time is

332
10.0
3.3

Daily unit holding cost =

Output

3.0
100.00

Qi =

0
days

Formula
SQRT(2*$G3*F9/F11)
IF(F13<F10,F13,F10)
$G3*F9/F14 + 0.5*F14*F11 + $G3*$G4
F18/G3

Figure 8.7 Delivery charge model for the farmers' co-operative.

Copied to
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G14:H14
G14:H15

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Example 9.5 - An Inventory Model with Shortages Allowed
Input

Output

Annual Demand
Setup/Ordering Cost
Unit Cost
Holding cost (two options)
(i) in s per year
(ii) as % of unit cost
Shortage cost per unit per year
Unit holding cost per year =

Optimal order size, Qo

Maximum stock level
Back-order size
No. of orders/year
Cycle time
Annual Costs..
Setup/ordering cost
Holding cost
Shortage cost
Purchase cost
Total cost

Cell
E10
E11
E13
E14
E15
E16
E17
E19
E20
E21
E22
E23

12,000
50.00 User input cells
25.00 are shaded

30.0%
4.00
7.50

678.2
235.9
442.3
17.7
2.9 weeks
884.65
307.70
576.95
300,000
301,769

Formula
IF(E8="",E7,E8*E5)
IF(E10=0, "Enter a value in either cell E7 or E8!","")
SQRT(2*E3*E4*(E9 + E10)/(E9*E10))
E9*E13/(E9 + E10)
E13 - E14
E3/E13
52/E16
E3*E4/E13
0.5*E10*E14*E14/E13
E9*(E13 - E14)^2/(2*E13)
E3*E5
SUM(E19:E22)

Figure 8.8 Deterministic model with planned storages.

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Figure 8.8 Deterministic model with planned storages.

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Example 9.6 - An Inventory Model with Storage Space Constraints
Setup cost
Holding cost (as % of unit cost)
Product Demand
Widget
Gadget
P

10,000
8,000
3,000

Product Demand
Widget
Gadget
P

7054
5643
2116

1,500.0 User input cells

30.0% are shaded

Unit
cost
18.00
15.00
10.00

Space
(per unit)
0.3
0.2
0.15

EOQ
Average
(Qo)
space
2357.0
353.6
2309.4
230.9
1732.1
129.9
Totals = 714.4

Variable
costs
12,728
10,392
5,196
28,316

Unit
cost
18.00
15.00
10.00

Space
(per unit)
0.3
0.2
0.15

EOQ
(Qo)

Variable
costs
12,922
10,551
5,275
28,749

Average
space
1979.6
296.9
1939.6
194.0
1454.7
109.1
Totals = 600.0

Percentage increase in variable costs =

Scaling Factor =

Solver Parameters
Set Target Cell:
Equal to:
By Changing Cells:
Subject to Constraints:

0.705

1.53%

(Initially, set Scaling Factor = 1)

E23
Max
E23
H18 <= 600
E23 >=0

= Storage space constraint

= Answer must be positive

Cell
Formula
G8
SQRT(2*C8*G$3/(G$4*D8))
H8
0.5*E8*G8
I8
C8*G$3/G8 + 0.5*G8*D8*G$4
H11
SUM(H8:H10)
Copy range B6:I11 into B13:I18
C15
C8*E$23
I15
C8*G$3/G15 + 0.5*G15*D15*G$4
I20
(I18 - I11)/I11

Figure 8.9 Multiple-product model with storage space constraint.

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Figure 8.9 Multiple-product model with storage space constraint.

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Example 9.7 - The Newsboy Problem: A Probabilistic Model with Discrete Demand
Input

Unit Cost, C =
Selling Price, S =
Scrap value, V =

Output

<- Probabilities -> <-- Expected -->

profit, EPi
Indiv. Cumul.
Demand, Di
Pi
CUMi
Sales
Profit
1
2
3
4
5
6
7
8

10
20
30
40
50
60
70
80

0.05
0.1
0.15
0.2
0.2
0.15
0.1
0.05

Optimal demand, Qo = 40

Cell
E11
F11
F18
G11
I18
D20
H20

3.00
5.00 User input cells are shaded
0.75

1
0.95
0.85
0.7
0.5
0.3
0.15
0.05

10
19.5
28
35
40
43
44.5
45

20
38
52
59
58
48
32
11

Maximum profit = 59

Formula
SUM(D11:D$18)
SUMPRODUCT(C$11:C11,D$11:D11) + C11*E12
SUMPRODUCT(C$11:C18,D$11:D18)
E$4*F11 - E$3*C11 + E$5*(C11 - F11)
MATCH(H20,G11:G18,0)
OFFSET(C10,I18,0)
MAX(G11:G18)

Copied to
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F12:F17
G12:G18

Figure 8.10 The Newsboy problem - a probabilistic model with discrete demand.

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Example 9.8 - A Probabilistic Model with Shortages
Input

Holding cost, H = 40.00

Shortage cost, B = 500.00
B/(B + H) = 0.93

Output

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8

Cell
E5
E11
F11
F12

All user input cells

are shaded

<- Probabilities ->

Indiv.
Sum
Demand, Di
Pi
SUMi
3
4
5
6
7
8
9
10

0.4
0.25
0.13
0.11
0.05
0.04
0.01
0.01

0.4
0.65
0.78
0.89
0.94
0.98
0.99
1

= Optimal amount

Formula
Copied to
E4/(E4 + E3)
SUM(D$11:D11)
E12:E18
IF(E11>=H$5)," = Optimal amount","")
IF(AND(E11<H$5,E12>=H$5)," = Optimal amount","") F13:F18

Figure 8.11 Probabilistic model with shortages.

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Example 9.9 - A Service-Level Model with Variable Demand/ Fixed Lead-Time
Input - must be in consistent time units
Time (day, week, month, year)
week
Ordering/Setup Cost
100.00
Unit Cost
10.00
Holding cost (two options)
(i) in s per year
(ii) as % of unit cost
30.0%
Unit holding cost per week
0.058
Output
Reorder level/point, R
Order quantity, Q
Safety stock

Cell
D8
E10
G10
E11
D13
D14
D15
J13
J14
J15
J16

2721.0
1316.6
221.0

Demand is normally-distributed
Mean =
500
Standard deviation =
60
Service Level %, SL = 95%
Lead Time, Lt =
5 week
52

Holding cost of safety stock

Holding cost of normal stock
Ordering/setup costs
Total costs per week

Formula
Copied to
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D10, K8, H16
IF(E9="",E8/G10,E9*E6/G10)
IF(E4="day",365,IF(E4="week",52,IF(E4="month",12,1)))
IF(E10=0,"Enter a value in either cell E8 or E9!","")
J5*J8 + D15
SQRT(2*J5*E5/E10)
ROUNDUP(NORMSINV(J7)*J6*SQRT(J8),0)
D15*E10
D14*E10/2
IF(D14=0,"",E5*J5/D14)
SUM(J13:J15)

Figure 8.12 Service-level model with variable demand/fixed lead-time.

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38
89

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Example 9.10 - A Service-Level Model with Fixed Demand/ Variable Lead-Time
Input - must be in consistent time units
Time (day, week, month, year)
week
Demand
500
Ordering/Setup Cost
100.00
Unit Cost
10.00
Holding cost (two options)
(i) in s per year
(ii) as % of unit cost
30.0%
Unit holding cost per week
0.058
Output
Lead time
Reorder level/point, R
Order quantity, Q

Cell
D14
E14
D15
D16
J14
J15
J16

6.6 week
3322.4
1316.6

Formula
J5 + NORMSINV(J7)*J6
E4
E5*D14
SQRT(2*E5*E6/E11)
D16*E11/2
E6*E5/D16
SUM(J14:J15)

Lead-time is normally-distributed
Mean =
5
Standard deviation =
1
Service Level %, SL =
95%
User input cells are shaded
52

Holding cost of normal stock

Ordering/setup costs
Total costs per week

Copied to

Figure 8.13 Service-level model with variable demand/variable lead-time.

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Figure 8.13 Service-level model with variable demand/variable lead-time.

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Example 9. 11 - A Periodic Review (i.e. Fixed-Period) Model
Input - must be in consistent time units
Time (day, week, month, year)
day
Ordering/Setup Cost
50.00
Unit Cost
10.00
Holding cost (two options)
(i) in s per year
20.00
(ii) as % of unit cost
Unit holding cost per day
0.055
Output
Reorder level/point, R
Order quantity, Q
Safety stock

Cell
D13
D14
D15

Figure 8.14

1081.0
1021.0
121.0

Demand is normally-distributed
Mean =
40
Standard deviation =
15
Service Level %, SL =
95%
Lead Time, Lt =
8 day
Review Period =
16 day
Stock On-hand =
60
365

Holding cost of safety stock

Holding cost of normal stock
Ordering/setup costs
Total costs per day

Formula
J4*(J7 + J8) + D15
D13 - J9
ROUNDUP(NORMSINV(J6)*J5*SQRT(J7+J8),0)

Periodic review (fixed-period) model.

Copied to

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Example 9.12 - A Multi-Period Model with Several Constraints
Input
All user input cells are shaded
Annual Demand
3,600
Ordering Cost
5.00
Unit Cost
2.00
Unit holding cost per year (two options)
(i) in s per year
(ii) as % of unit cost
20.0%
Unit holding cost per year
0.40

Output
EOQ
300.00
Cycle time
(in months)
1.0
Total cost 7,320

Monthly
Order
Ending Cost per
Month Demand Quantity Inventory Period
1
240
270
30
546
2
270
330
90
668
3
450
360
0
725
4
210
270
60
547
5
240
270
90
548
6
300
270
60
547
7
330
330
60
667
8
420
360
0
725
9
240
270
30
546
10
330
300
0
605
11
300
300
0
605
12
270
270
0
545
Annual demand = 3,600
7,274 = Annual cost
Objective: Minimize surplus stock =
420
Note: Switch on the "Assume Linear Model" parameter in the Solver Options dialog box

Figure 8.15 Multi-period model with several constraints.

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Solver Parameters
Set Target Cell:
Equal to:
By Changing Cells:
Subject to Constraints:

Cell
I6
I8
I9
F10
F11
F14
G14
D26
F27

F27
Min
E14:E25
E14:E25 >= 270
E14:E25 <= 360
E14:E25 = int(eger)
F14:E25 >= 0

= Quantity discount constraint

= Order size - upper limit
= Answers must be integer
= No stockouts allowed!

Formula
SQRT(2*F4*F5/F10)
12*I6/F4
F4*F5/I6 + 0.5*F10*I6 = F4*F6
IF(F9="",F8,F6*F9)
IF(F10=0,"Enter a value in eithe cell F8 or F9!","")
SUM(E$14:E14) - SUM(D$14:D14)
F$5 + F14*F$10/12 = E14*F$6
SUM(D14:D25)
SUM(F14:F25)

Figure 8.15 Multi-period model with several constraints.

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Figure 8.15 Multi-period model with several constraints.

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Figure 8.15 Multi-period model with several constraints.

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Example 9.13 - A Simulation Model for Inventory Control
Demand table
<-- Limits --> DemLower Upper
and
0
0.03
0
0.03 0.08
1
0.08 0.21
2
0.21 0.46
3
0.46 0.68
4
0.68 0.88
5
0.88 1.00
6

Pi
0.03
0.05
0.13
0.25
0.22
0.20
0.12
1.00

Lead-time table
<-- Limits --> No. of
Lower Upper days
0
0.20
1
0.20
0.70
2
0.70
1.00
3

Reorder level =
Order quantity =

Output table
Units Begin. RAND Dem- Ending New
Day Recvd. Invntry. No.
and Invntry. Level
1
30
0.74
5
25
25
2
0
25
0.67
4
21
21
3
0
21
0.83
5
16
16
4
0
16
0.28
3
13
13
5
0
13
0.25
3
10
40
6
0
10
0.87
5
5
35
7
0
5
0.38
3
2
32
8
30
32
0.01
0
32
32
9
0
32
0.84
5
27
27
10
0
27
0.62
4
23
23
11
0
23
0.88
6
17
17
12
0
17
0.97
6
11
11
13
0
11
0.36
3
8
38
14
0
8
0.93
6
2
32
58
Service Level = 100.0%

Pi
0.20
0.50
0.30
1.00

User input
cells are
shaded

15
30

Lost
Lead Recpt.
sales Order? time Day
0
No
0
No
0
No
0
Yes
3
8
0
No
0
No
0
No
0
No
0
No
0
No
0
No
0
Yes
2
15
0
No
0
No
0

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46

A
B
C
D
E
F
G
Case Study 9.1 - A Material Requirements Planning (MRP) Model

The BOM Table

Part Number: Description

Table
Top Assembly
Table Top
Drawer
Leg Assembly
Legs
Side Rung
Connecting Rung

The MRP Output Table

1
Table
Week Number

BOM
Level

2
Top Assembly
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
3
Table Top
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

Lead On Planned
Time Hand Order

0
1
2
2
1
2
2
2

1
1001
2001
2002
1002
2003
2004
2005

1
1
1
1
1
4
2
1

Overdue

1
0
0
50
0
0
0

2
0
0
50
0
0
130

1
0
0
50
0
0
160

Lead Time =
2
3
4
130 180 100
100
0
0
50
20
0
0
160 100
0
160 100
100
0
0

5
0
0
0
0
0
0

1
160
0
180
0
0
80

2
100
0
20
80
80
0

Lead Time =
3
4
0
0
0
0
0
0
0
0
0
0
0
0

5
0
0
0
0
0
0

Master Production Schedule

Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

Id. No. of
Code Units

Overdue

Overdue

1
2
1
1
1
1
1
1

50
50
180
200
100
250
50
110

Lead Time =
3
4
180 180
0
0
50
0
130 180
130 180
180 100

Figure 8.20 MRP model for the kitchen table example.

User input
cells are
shaded

Rel. Row

25
35
35
25
65
65
65

1
5
100
0
0
100
100
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

A
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94

B
4
Drawer
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
5
Leg Assembly
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

7
Side Rung
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
8
Connecting Rung
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts

1
Overdue
160
0
200
0
0
0
60

2
100
0
40
60
60
0

Lead Time =
3
4
0
0
0
0
0
0
0
0
0
0
0
0

5
0
0
0
0
0
0

1
0
0
100
0
0
30

2
130
0
100
30
30
180

Lead Time =
3
4
180 100
0
0
0
0
180 100
180 100
100
0

5
0
0
0
0
0
0

1
120
0
250
0
0
490

2
720
100
130
490
490
400

Lead Time =
3
4
400
0
0
0
0
0
400
0
400
0
0
0

5
0
0
0
0
0
0

1
60
0
50
10
10
360

2
360
0
0
360
360
200

Lead Time =
3
4
200
0
0
0
0
0
200
0
200
0
0
0

5
0
0
0
0
0
0

1
30
0
110
0
0

Lead Time =
2
3
4
180 100
0
0
0
0
80
0
0
100 100
0
100 100
0

Overdue

6
Legs
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

Overdue

Overdue

10

10

Overdue

Figure 8.20 MRP model for the kitchen table example.

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0

7
0
0
0
0
0

8
0
0
0
0
0

1
5
0
0
0
0
0

A
95
96

B
Planned Order Releases

C
0

D
100

E
100

Figure 8.20 MRP model for the kitchen table example.

F
0

G
0

H
0

I
0

J
0

K
0

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46

Figure 8.20 MRP model for the kitchen table example.

47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94

M
N
Page-break

Figure 8.20 MRP model for the kitchen table example.

95
96

Figure 8.20 MRP model for the kitchen table example.

A
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96

B
4
Drawer
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
5
Leg Assembly
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

Overdue

Overdue

7
Side Rung
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
8
Connecting Rung
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

Figure 8.20 (cont.)

Overdue

Overdue

10

10

Overdue

1
160
0
200
0
0
60

Lead Time =
2
3
4
100
0
0
0
0
0
40
0
0
60
0
0
60
0
0
0
0
0

5
0
0
0
0
0
0

1
0
0
100
0
0
30

2
130
0
100
30
30
180

Lead Time =
3
4
180 100
0
0
0
0
180 100
180 100
100
0

5
0
0
0
0
0
0

1
120
0
250
0
0
490

2
720
100
130
490
490
400

Lead Time =
3
4
400
0
0
0
0
0
400
0
400
0
0
0

5
0
0
0
0
0
0

1
60
0
50
10
10
360

2
360
0
0
360
360
200

Lead Time =
3
4
200
0
0
0
0
0
200
0
200
0
0
0

5
0
0
0
0
0
0

1
30
0
110
0
0
100

2
180
0
80
100
100
100

Lead Time =
3
4
100
0
0
0
0
0
100
0
100
0
0
0

5
0
0
0
0
0
0

6
Legs
Week Number
Gross Requirements
Scheduled Receipts
On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

6
0
0
0
0
0
0

7
0
0
0
0
0
0

8
0
0
0
0
0
0

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37

A
B
C
D
E
F
G
H
I
J
Example 9. 14 - A Model for the Part Period Balancing (PPB) Method
Input

REQP
Period, P
Weighted REQi
CUMi
(CUMi - EPP)/EPP

Ordering (or Setup) Cost = 200

Unit holding cost = 1.00
Economic part period (EPP) =
200

200
600
2.0
2.0

Weighted REQi
CUMi
(CUMi - EPP)/EPP
0.5
Order Data =
2
New Factor, NFi

-150
0
-1.0
1.0

100
100
-0.5
0.5
50
200
0

Weighted REQi
CUMi
(CUMi - EPP)/EPP

-150
0
-1.0
1.0

0.1
Order Data =
5
New Factor, NFi

User input cells

are shaded

<----------- Net requirements, REQP, for each period P --------------->

150
100
150
0
50
75
100
25
20
1
2
3
4
5
6
7
8
9
0
100
300
0
0
100
400
400
-1.0
-0.5
1.0
1.0
1.0
0.5
1.0
1.0
150
100
Answer: Place an order for
0
0
1
2

0.5
Order Data =
0
New Factor, NFi

-100
0
-1.0
1.0

0
0
0
0
-1.0
-1.0
1.0
1.0
150
0
Answer: Place an order for
0
0
0
0
-100
0
-1.0
1.0

-150
0
-1.0
1.0

-1
0
-1.0
1.0

Answer: Place an order for

0
0
0
0

250
3

-50
0
-1.0
1.0
220
0

375
975
3.9
3.9

600
1575
6.9
6.9

175
1750
7.8
7.8

160
1910
8.6
8.6

1
6

125
850
3.3
3.3

120
970
3.9
3.9

units in period
1
2

3
3

0
100
0
100
-1.0
-0.5
1.0
0.5
75
100
units in period
0
0

50
150
-0.3
0.3
25
6
0

units in period
4
5
225
325
0.6
0.6

400
725
2.6
2.6

60
210
0.1
0.1
20
0

Copy cell range B11:L17 repeatedly down the spreadsheet, placing the cursor in cells B19,
B27. until the 'New Factor, NFi' row contains nothing but zeros (e.g. see row 33 above).

Figure 8.21 Model for the part-period balancing (PBB) method.

(Note that this model has been modified)

38

Figure 8.21 Model for the part-period balancing (PBB) method.

(Note that this model has been modified)

A
1
2
3
4
5
6
7
8
9

Product
name
Gizmo
Gadget
Widget
Sprocket

No. in
stock
10
25
8
40

Product
price
10.00
12.50
20.00
4.50

Sample Figure

Year

Cash
flow
1
4
8
16

1
2
3
4
5

A
10
11
12
13
14

Column(B3) =
Column(D5:D9) =

2
4

INDEX(B4:D7,2,3) =

12.50

Row(B3) =
Row(D5:D9) =

H
3
5

NORMSINV(0.95) =

I
1
2
3
4
5
6
7
8
9

I
10
11
12
13
14

1.6449