Formulas and Equations¶
The formal expression of the formulas and equations used in the library are detailed here.
Standard Deviation of Lead-time demand¶
\[\sigma_{LTD} = \sqrt{LT \times \sigma_{D}^2 + D^2 \times \sigma_{LT}^2}\]
- where:
sigma_{LTD} = Standard deviation of lead-time demand
LT = Lead-time
D = Demand
Reorder Level¶
The formula used for calculating the reorder level is:
\[RL = LT \times D + Z \times \sigma \times \sqrt{LT}\]
- where:
Z = service level
LT = Lead-time
D = Demand
Safety Stock¶
The formula used for safety stock is:
\[SS = Z \times \sigma \times \sqrt{LT}\]
- where:
SS = Safety Stock
Z = service level
LT = Lead-time
Economic Order Quantity (eoq)¶
The economic order quantity is calculated using:
\[eoq_{0} = \sqrt \frac{2 \times R \times D}{HC}\]
- where:
R = Reorder Cost
D = Demand
HC = Holding Cost