The RQ Model

Optimal order quantity

$Q=\sqrt[\phantom{2}]{\frac{2*D*(K+p*n(R))}{h}}$

Avg. lead time demand

LTD $=$ L $.$ D

Std$.$ deviation of lead time demand

$=\sqrt[\phantom{2}]{L*{}_D^2+D^2*{}_L^2}$

Optimal in$-$stock probability

${}^{**}=1-\frac{Qh}{pD}$

Safety stock

$SS=z*$

Reorder point

$R=LTD+SS$

Total cost function

$G(Q,R)=h(\frac{Q}{2}+SS)+K(\frac{D}{Q})+p*n(R)(\frac{D}{Q})$