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| MODEL ASSUMPTIONS & PARAMETERS | |||||||||
| All blue values are user-adjustable inputs | |||||||||
| General Parameters | Shortage / Stockout Cost Parameters | ||||||||
| Parameter | Value | Unit | Description | Parameter | Value | Unit | Description | ||
| Working Days per Year | 252 | days | Business days excluding holidays | Lost Sales Cost (per unit) | $50 | $ / unit | Revenue lost per stockout unit | ||
| Planning Horizon | 12 | months | Forward planning period | Backorder Cost (per unit) | $15 | $ / unit | Cost to expedite backordered items | ||
| Review Period | 30 | days | Days between inventory reviews | Customer Goodwill Cost | $25 | $ / incident | Estimated loss of customer loyalty | ||
| Warehouse Capacity (units) | 50,000 | units | Maximum storage capacity | Emergency Shipment Premium | 0.5x | multiplier | Premium over standard freight | ||
| Currency | USD | Reporting currency | Target Fill Rate | 97.0% | % | Desired order fill rate | |||
| Inflation Rate (Annual) | 3.0% | % | Expected annual cost escalation | ||||||
| Tax Rate | 21.0% | % | Corporate tax rate for cost calculations | ABC Classification Thresholds | |||||
| Discount Rate (WACC) | 8.0% | % | Weighted average cost of capital | Class | Cumulative % | Typical SKU % | Description | ||
| A - Critical | 80% | 10-20% | High value, tight control, frequent review | ||||||
| Holding / Carrying Cost Components | B - Important | 95% | 20-30% | Moderate value, moderate control | |||||
| Cost Component | Rate (%) | Unit | Description | C - Standard | 100% | 50-70% | Low value, simple controls, bulk ordering | ||
| Cost of Capital | 8.0% | % of value | Opportunity cost of invested capital | ||||||
| Storage Cost | 4.0% | % of value | Warehousing, rent, utilities | Service Level & Safety Stock Parameters | |||||
| Insurance | 1.5% | % of value | Inventory insurance premiums | ABC Class | Service Level | Z-Score | Review Frequency | ||
| Obsolescence / Shrinkage | 3.0% | % of value | Loss from damage, theft, expiration | A - Critical | 99.0% | 2.33 | Weekly | ||
| Handling & Labor | 2.0% | % of value | Material handling labor costs | B - Important | 95.0% | 1.65 | Bi-weekly | ||
| Taxes (Property) | 1.0% | % of value | Property taxes on inventory | C - Standard | 90.0% | 1.28 | Monthly | ||
| Total Holding Cost Rate | 19.5% | % of value | Sum of all carrying cost components | ||||||
| Lead Time Assumptions | |||||||||
| Ordering Cost Components | Parameter | Value | Unit | Description | |||||
| Cost Component | Value | Unit | Description | Default Lead Time (Domestic) | 7 | days | Standard domestic supplier lead time | ||
| Purchase Order Processing | $25 | $ / order | Admin cost per PO | Default Lead Time (International) | 30 | days | Standard international lead time | ||
| Receiving & Inspection | $15 | $ / order | Inbound quality check cost | Lead Time Variability (Std Dev) | 3 | days | Standard deviation of lead time | ||
| Transportation / Freight | $35 | $ / order | Average shipping cost per order | Demand Variability (Std Dev %) | 15.0% | % of avg | Coefficient of variation for demand | ||
| Communication & Follow-up | $5 | $ / order | Supplier communication | ||||||
| System / IT Processing | $10 | $ / order | ERP transaction cost | ||||||
| Total Ordering Cost per Order | $90 | $ / order | Sum of all ordering costs | ||||||
| Notes: | |||||||||
| 1. All blue-colored values are user inputs that can be modified to calibrate the model. | |||||||||
| 2. Holding cost rate is used in EOQ and carrying cost calculations across all items. | |||||||||
| 3. Service levels and Z-scores drive safety stock calculations by ABC class. | |||||||||
| 4. Lead time assumptions serve as defaults; item-level overrides are set in Inventory Data. | |||||||||
| 5. Sample data provided for demonstration. Replace with actual operational data. | |||||||||