Compendium admissions 2023-25


Carrying or Holding Cost per Item (Cc)



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PI Prep Kit 2023
Carrying or Holding Cost per Item (Cc)
Costs incurred due to holding Inventory at various stages across the supply chain. a. Storage Costs – Space/Land for storing the inventory, Personnel Costs for safety and management of inventory b. Risks Costs – Insurance, obsolescence, damage, pilferage costs Thus, Cc
𝖺 Inventory(Q)
Ordering Costs (Co)-Per Order Cost Costs involved in placing an order. Includes, a. Purchase Order Costs b. Transportation Costs and others Thus, Co
𝖺 1/Inventory(Q) AIM – Since the Cc and Co are oppositely related with the Inventory (Q, any Inventory Model aims to find the optimum balance between both

Basic Terminology
CoCost of placing one order
Cc – Annual per-unit carrying cost/holding cost
D – Annual Demand
Q – Per Order Quantity


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PCost Price per Item
Total Cost
• Annual Ordering Cost = C
o
x (Total no. of orders annually)
= C
o
x (D/Q)
• Annual Carrying Cost = C
c
x (Average Inventory)
= C
c
x (Q, i.e., Average of the Sawtooth Curve
• Annual Mfg. Cost = P x (Annual Demand)
= P x Db

Total Cost = C
o
x (D/Q) + C
c
x (Q) + P x Db Total Quality Management (TQM)
A core definition of total quality management (TQM) describes a management approach to long-term success through customer satisfaction. Ina TQM effort, all members of an organization participate in improving processes, products, services, and the culture in which they work.


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• TQM can be summarized as a management system fora customer-focused organization that involves all employees in continual improvement. It uses strategy, data, and effective communications to integrate quality discipline into the culture and activities of the organization. Many of these concepts are present in modern quality management systems, the successor to TQM.
• Customer-focused: The customer ultimately determines the level of quality. No matter what an organization does to foster quality improvement—training employees, integrating quality into the design processor upgrading computers or software—the customer determines whether the efforts were worthwhile.
• Total employee involvement All employees participate in working toward common goals. Total employee commitment can only be obtained after fear has been driven from the workplace, when empowerment has occurred, and when management has provided the proper environment. High- performance work systems integrate continuous improvement efforts with normal business operations.
Self-managed work teams are one form of empowerment.
• Process-centered: A fundamental part of TQM is a focus on process thinking. A process is a series of steps that take inputs from suppliers (internal or external) and transform them into outputs delivered to customers (internal or external. The steps required to carryout the process are defined, and performance measures are continuously monitored to detect unexpected variations.
Lean Lean is a set of management practices to improve efficiency and effectiveness by eliminating waste. The core principle of lean is to reduce and eliminate non-value-adding activities and waste.

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