Medical Laser Equipment

1156 Words May 7th, 2012 5 Pages
INTRODUCTION

This Paper analyzes the Case 16: Medical Laser Equipment. Some of the given facts are as follows: Order is set to every Monday which means an annual total of 50 orders No. of Periods = 250 Days Annual Demand = 166 Units Average Inventory = 5 Units Order Cost = $95 Stock out Cost = $250 Holding Cost = 50% * $1,000 = $500 Capital Cost = 10% Handling Cost = 15% Obsolescence = 5% Storage Cost = 20%
We started the case analysis by the normality test for the current data to check if the data is normally distributed or not. Our objective is to calculate the current Total Cost and then come up with a better solution to lower the cost.
As a result, we have developed two scenarios, both of them reveled
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of Orders
( I ) ̅ = Average Inventory
DDLT = Demand During Lead Time
SS = Safety Stock
ROP = Re-Order Point
CURRENT SITUATION

In the current situation, the order is set to every Monday which means a total number of 50 orders for the whole period, and the average Inventory calculated from the given data is 5 units. Therefore, total cost of the current situation calculation will be as follows: q=50 Orders C_P=$95 C_H=$500 ( I ) ̅=5 Units
〖 ⇒ TC=(C〗_P*q)+(( I ) ̅* C_H)=(95*50)+(5*500) =4,750+2,500 =$7,250

PROPOSED MODELS

In line with our objective, we proposed two different models both resulted in reducing the total cost. Proposed scenarios are: Scenario I: Using Economic Order Quantity Concept Scenario II: Using McLaren’s Order Moment Concept
Below are the details of each scenario.
SCENARIO I: ECONOMIC ORDER QUANTITY - EOQ
EOQ as described everywhere is “the order quantity that minimizes total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models”. This model uses the following assumptions: The ordering cost is constant which is in our case is $95. The rate of demand is known and normally distributed which have been proved by the normality test presented above. The lead time