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Chapter 2: Problem 6

What is the key difference in the modeling assumptions between the \(\mathrm{EOQ}\) and the Wagner-Whitin models?

Short Answer

Expert verified
Answer: The primary difference between the EOQ and Wagner-Whitin models in terms of demand is that the EOQ model assumes constant demand over time, whereas the Wagner-Whitin model allows for variable demand across different time periods.

Step by step solution

01

EOQ Model Assumptions

The EOQ model assumes constant demand over time, and the replenishment lead time is constant as well. Other key assumptions include: 1. The ordering cost per order and the holding cost per unit per time period are constant. 2. The demand for the item is deterministic (known). 3. The stock is replenished instantaneously. 4. The objective is to minimize total inventory cost that consists of ordering and holding costs.
02

Wagner-Whitin Model Assumptions

Unlike the EOQ model, the Wagner-Whitin model allows for time-varying demand and does not assume instant replenishment. The main assumptions of the Wagner-Whitin model include: 1. Demand for each time period is known. 2. The replenishment lead time is zero. 3. Ordering and holding costs are linear (no discounts with increased order quantities). 4. The objective is to minimize total inventory cost, which includes setup, holding, and backorder costs over a planning horizon.
03

Key Difference

The primary difference between the EOQ and Wagner-Whitin models lies in the treatment of demand. The EOQ model assumes that demand is constant and occurs at a uniform rate over time, while the Wagner-Whitin model allows for variable demand across different time periods. This makes the Wagner-Whitin model more suitable for situations where demand changes in a predictable manner and the EOQ model more appropriate for items with steady, constant demand.

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Most popular questions from this chapter

Give at least three criticisms of the validity of the Wapner-Whitin model.

Suppose you are stocking parts purchased from vendors in a warehouse. How could you use a ( \(Q, r\) ) model to determine whether a vendor of a part with a higher price but a shorter lead time is offering a good deal? What other factors should you consider in deciding to change vendors?

Harris, in the original 1913 paper on the \(\mathrm{EOQ}\) model, suggested that "most managers, indeed, have a rather hazy idea as to just what this [setup] cost amounts to." a. Do you think that setup cost, as defined in the EOQ model, is more easily specified today than in 1913 ? Why or why not? b. Give some examples of costs that might make up this setup cost. c. What might setup cost in the model actually be serving as a surrogate for in the real system?

Consider the following situations. Label them as either A for appropriate or \(L\) for less appropriate for application of the \(\mathrm{EOQ}\) model. a. Automobile manufacturer ordering screws from a vendor b. Automobile manufacturer deciding on how many cars to paint per batch of a particular color A job shop ordering bar stock d. Office ordering copier paper A steel company deciding how many slabs to move at once between the casting furnace and the rolling mill

Why is the statement "The reorder point \(r\) affects customer service, while the replenishment quantity \(Q\) affects replenishment frequency" true in rough terms but not precisely true?
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