calculations.rst

Formulas and Equations

The formal expression of the formulas and equations used in the library are detailed here.

Lead-time Demand

LD = LT \times D

where:

LD = Lead-time Demand

LT = Lead-time

D = Demand

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