Calculating raw material and work-in-process inventories in MTO/MTS production

We examine the role of inventory in a hybrid Make-to-Stock (MTS)/Make-to-Order (MTO)production environment, based on a case study performed in a fruit juice company. In this example, demands for Finished Good (FG) inventories follow normal distribution .We propose a model tocalculate economic order quantity (EOQ) by obtaining demands for Raw Material (RM) inventoriesthrough Work-in-process (WIP) and FG inventories. For validity of our claim we illustrate some samples of production in different days and compare it with old method estimation of WIP and EOQ.

Keywords:

FG inventories , RM inventories , WIP inventoriesHybrid MTS/MTO