Inventory Cost Optimization & Aging Analysis
This workflow evaluates and optimizes inventory costs across two dimensions: EOQ — comparing current order policies against the economic optimum to identify cost savings and reduce excess stock, and FIFO — analysing batch-level movements to detect slow-moving inventory and estimate holding cost exposure. It then presents results in an interactive dashboard.
Understanding the Formulas
Economic Order Quantity (EOQ)
EOQ= sqrt((2 $["Annual_Demand"] $["Ordering_Cost"]) / $["Holding_Cost_Per_Unit_Per_Year"]))
This formula calculates the optimal replenishment quantity that minimizes the combined ordering and holding costs.
Current Holding Cost
Current Holding Cost=(($Current_Order_Policy_Qty / 2) + $["Safety_stock"]) * $Holding_Cost_Per_Unit_Per_Year
Holding cost estimates the annual cost of storing inventory.
The formula uses average cycle stock (Current_Order_Policy_Qty / 2) plus safety stock because inventory levels fluctuate throughout the replenishment cycle.
Reorder Point (ROP)
ROP=Average Daily Demand×Lead Time+Safety Stock
Defines the inventory threshold that triggers a replenishment order to avoid stockouts during lead time.