Intro to Supply Chain Chap 11

1. Annual demand: 16000 Annual holding cost, per unit: $2.50 Cost per order: $50.00 Economic order quantity: 800

2.Annual demand: 32000 Annual holding cost, per unit: $2.50 Cost per order: $50.00 Economic order quantity: 1131

No, the EOQ does not double as the annual demand doubles. The EOQ increases by the square-root of the product of two-times the demand times ordering cost, divided by holding cost.

3.Annual demand: 16000 Annual holding cost, per unit: $2.50 Cost per order: $50.00 Discount cost per order: $50.00 Cost per unit: $50.00 Discount cost per unit: $45.00

Discount order quantity: 1500 Discounted total cost of units: $720,000.00 Discount annual holding cost: $1,875.00 Discount annual ordering cost: $533.33 Total cost: $722,408.33

Economic order quantity: 800 Total cost of units: $800,000.00 EOQ annual holding cost: $1,000.00 EOQ annual ordering cost: $1,000.00 Total cost: $802,000.00

Total savings under EOQ: -$79,591.67

Pam should order 1500 at a time to take advantage of the lower cost per unit. Even though it's not the EOQ, ordering 1500 units per order will result in a total annual savings of $79,591.67.

5. Time units: days Demand units: tins Time between periodic review of inventory: 10 Order lead time: 3 Average demand per period: 7 Average demand during reorder period and order lead time: 91 Standard deviation of demand during reorder period and order lead time: 4 Percent desired service level: 90% z value (for desired service level): 1.28 Restocking level: 97

Restocking level drops significantly because the standard deviation of demand decreased. This is true because the restocking level is determined by the average demand during the reorder period and lead time plus z times the standard deviation of the demand during the reorder period and lead time.

6. days days tins tins tins

tins

15. Annual demand: 630 Annual holding cost, per unit: $2.00 Cost per order: $9.00 Discount cost per order: $9.00 Cost per unit: $6.00...