Determining the Optimum Number of Ordering Cycles

by Brian Holloway

Submitted : Spring 2013

Inventory management is a task that all businesses have to account for on a day-to-day basis. Unit quantities, holding costs, and price breaks are just a few of the things that need to be considered when a product is being ordered and stored. By using calculus, students will be able to determine the optimum number of ordering cycles each year, the corresponding number of units ordered each cycle, the total annual cost, and the break-even selling price. There is no set equation to achieve these results; so by optimizing other equations, the students will be able to develop a new system that can calculate the desired outcome. Before calculating the results, please understand how important it is to include every factor in the situation. Any sign of miscalculation could cost the company hundreds or even thousands of dollars. The ability to optimize and apply prior mathematical knowledge is detrimental to the task at hand. From this experience, students should learn that having the aptitude to optimize systems and management within a company is critical in the real world.

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