From the course: Excel Supply Chain Analysis: Solving Inventory Problems

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Solution: The back order problem

Solution: The back order problem - Microsoft Excel Tutorial

From the course: Excel Supply Chain Analysis: Solving Inventory Problems

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Solution: The back order problem

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- [Instructor] In the previous movie, I presented a challenge to calculate the economic order quantity when your store allows back orders. And in this movie, I will use the techniques from chapter two to solve that problem. I'll start by calculating the holding cost and that is the amount that it costs to retain an item in inventory for a year. And I know it's a year because my flow rate or demand is in units per year. So the holding costs will be equal. The item cost, which is in B5, multiplied by the inventory percentage, which is in B6, and enter. That gives us a holding cost of $22.05. Now for the economic order quantity, I can translate the formula here for Q* into the EOQ. So in B8, which I've already selected, I'll type equal and we're taking the square root of the quantity under the radical sign. And that will be two multiplied by the cost of setup. And that is the cost of placing an order, also multiplied by the demand that's in B4. And we'll divide that by the holding cost…

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