MANUFACTURING MODEL

The manufacturing model can be divided into:

1. Manufacturing model with no shortages.
2. Manufacturing model with shortages.
Manufacturing model with no shortages.
In this model the following assumptions are made:
1. Demand is at a constant rate.
2. All cost coefficients are constants.
3. There is no shortage cost.
4. The replacement rate is finite and greater then the demand rate. This is also
called replenishment rate or manufacturing rate.
Schematically this model is illustrated as follows:

Here,
r : annual demand in units.
k: production rate of the items.
t : time when we consume and
build up.( t1 + t2 )
Manufacturing model with shortages.
The assumptions made in this model are the same as the above model.
There are four components of inventory cost:
1. Item cost 2. Setup or order cost 3. Items holding cost 4.shortage
Schematically it can be represented as follows: