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Dear sir
I watched the opentution lectures and still I cannot grasp the belowWhat has EBQ got to do with
(1-d/r) ?Because economic batch quantity will say
What’s the best quantity to manufacture
Well that’s clear butWhat has EBQ got to do with
(1-d/r) ?For EOQ calculations we assume that if we order (say) 100 units, then the delivery will be of 100 units all at once.
For EBQ calculations we are producing in our own factory and therefore if we order 100 units the factor will start producing immediately (and delivering to us as they produce) but depending on how long production takes it might be several days before we will have received the full 100. The (1-d/r) is accounting for this fact – that we are receiving the units spread over a few days.
Sir then putting it in another perspective
Supposing we ( store house ) receives 5000 units each time . But the customers purchase units and then units are getting decreased from stores
And then 5000 units would not be the stock which is at the warehouse .
So it is for that reason why we have the adjustment
(1-D/r)
Am I correct sir
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