Part Period Balancing
?To set the order horizon (the number of periods) that most closely
balance the total holding cost with the set-up cost
? Procedure
?Determine holding costs for each period
?Find the one closer to $K
?Ex.7.5: K = $80, h = $2, r = (18, 30, 42, 5, 20)
Starting in period 1:
Order Horizon Total Holding Cost
$80 is closer to 60 than to 228
1 0
set order horizon = 2
2 60
$Y_1 = r_1 + r_2 = 18 + 30 = 48$
3 228 > $80
Starting in period 3:
Order Horizon Total Holding Cost
$80 is closer to 90 than to 10
1 0
set order horizon = 3
2 10
$Y_3 = r_3 + r_4 + r_5 = 42 + 5 + 20 = 67$
3 90 > $80
y = (48, 0, 67, 0, 0); Setup and holding costs = $310
