1. What is Time Between Orders?

Time Between Orders (TBO) is a key inventory management metric that determines the optimal interval between placing orders to minimize total inventory costs while meeting demand.

2. How Does the Calculator Work?

The calculator uses the TBO formula:

Where:

• \( D \) — Annual demand (units)
• \( S \) — Setup or ordering cost per order ($)
• \( H \) — Holding or carrying cost per unit per year ($)

Explanation: The formula balances ordering costs (which decrease with fewer, larger orders) against holding costs (which increase with larger inventory levels).

3. Importance of TBO Calculation

Details: Calculating optimal TBO helps businesses minimize total inventory costs, reduce stockouts, and improve cash flow by optimizing inventory levels.

4. Using the Calculator

Tips: Enter annual demand in units, setup cost per order in dollars, and holding cost per unit per year in dollars. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between TBO and EOQ?
A: EOQ (Economic Order Quantity) calculates optimal order quantity, while TBO calculates the optimal time interval between orders based on that quantity.

Q2: How should I determine holding costs?
A: Holding costs typically include storage, insurance, depreciation, and opportunity cost of capital - usually 20-30% of item value annually.

Q3: Does this work for perishable items?
A: The basic TBO model assumes non-perishable items. For perishables, you must also consider shelf life and spoilage rates.

Q4: What if demand is not constant?
A: The basic model assumes constant demand. For seasonal or variable demand, more advanced models should be used.

Q5: How often should I recalculate TBO?
A: Recalculate whenever demand patterns, costs, or other key parameters change significantly - typically quarterly or annually.