a. Using this data, compute the solutions using the Lot for Lot and Periodic Order Quantity heuristics? Which of these heuristics would perform better and why? b. Assuming that the demand follows a normal distribution with the mean and variance from the data given above, determine the optimal order should be greater or lesser than the single period EOQ model.
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The demand for a clothing brand is shown in the table below. The cost per order is about $4000. Cost of each unit of clothing = $5. Carrying cost percentage = 25% per item per 5 months. The analysis period = 5 month duration.
Month | Demand |
1 | 400 |
2 | 300 |
3 | 200 |
4 | 400 |
5 | 500 |
a. Using this data, compute the solutions using the Lot for Lot and Periodic Order Quantity heuristics? Which of these heuristics would perform better and why?
b. Assuming that the demand follows a
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- The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed. Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation: Let Dj = annual demand for item j Cj = unit cost of item j Sj = cost per order placed for item j i = inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goods wj = space required for item j The decision variables are Qj, the amount of item j to order. The model is:…The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed. Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation: Let Dj = annual demand for item j Cj = unit cost of item j Sj = cost per order placed for item j i = inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goods wj = space required for item j The decision variables are Qj, the amount of item j to order. The model is: (view…The table below provides demand data for 11 days (days 10-20 for the current year) for one product for the next 4 questions. The previous order was for 300 units at the end of day 9. The lead time is a constant two days. At the beginning of day 10 the inventory level is 450 units. Orders are made at the end of a day. Suppose inventory is managed with a reorder point system where Q=300 and the reorder point is 250. Day Demand Inventory 10 120 11 150 12 120 13 100 14 80 15 80 16 60 17 60 18 60 19 40 20 80 1) When is the next order? end of day ________ 2) How large is the next order? ________ 3) When is the subsequent order (after that above)? end of day _______ 4) How large is that order? _________
- Calculate the annual economic order quantity from the information provided below.INFORMATIONGM Electronics expects to sell 800 alarm systems each month of 2022 at R4 000 each. The cost price of each alarm system is R2 000. The inventory holding cost of an alarm system is 1% of the unit cost price. The cost of placing an order for the alarm systems is estimated at R60.The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost, and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed. Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation: Let Dj = annual demand for item j Cj = unit cost of item j Sj = cost per order placed for item j i = inventory carrying charge as a percentage of the cost per unit W = the maximum amount of space available for all goods wj = space required for item j The decision variables are Qj , the amount of item j to order. The model is: In…A distribution center (DC) in Wisconsin stocks Sony plasma TV sets. The center receives its inventory from a mega warehouse in Kansas with a lead time (L) of 5 days. The DC uses a reorder point (R) of 300 sets and afixed order quantity (Q) of 250 sets. The current on-hand inventory (OH) at the end of Day 1 is 400 sets, there are no scheduled receipts (SR), and there are no backorders (BO). Assume that all demands and receipts occur at the end of the day. The inventory position is compared to the reorder point after demands and receipts are accounted for. If necessary, an order is placed and the inventory position is updated. Given the demand schedule in the table below, determine when to order using a (Q) system
- You are currently working as a manager in a retail company. It is known that the company sells 2,500 cartons of cooking oil per year. The cost for each reorder cost of cooking oil is Rp. 750,000 and the carrying cost is Rp. 150,000. By using the Economic Order Quantity (EOQ) formula, determine how many units are optimal for each order?The office manager for the Metro Life Insurance Companyorders letterhead stationery from an office products firm inboxes of 500 sheets. The company uses 6500 boxes peryear. Annual carrying costs are $3 per box, and orderingcosts are $28. The following discount price schedule isprovided by the office supply company: Order Quantity (boxes) Price per Box200–999 $161000–2999 143000–5999 136000 12 Determine the optimal order quantity and the total annualinventory cost.Quantity discounts. This type of problem can be recognized when a list showing prices for eachquantity range is given along with the basic EOQ information.a. If unit holding cost is constant, use these steps to solve the problem:1. Use Formula 13–2 to find Q.2. Locate Q in the price schedule.3. Compute TC using Formula 13–1 for Q and for all lower-cost price breaks.b. If unit holding cost is a percentage of unit price, use these steps to solve the problem:1. Beginning with the lowest cost, and using the corresponding H for that cost, compute Qusing Formula 13–2. Continue moving up in unit cost until a feasible Q is found.2. Locate the feasible Q in the price schedule.3. Compute TC using Formula 13–9 for Q and for all lower-cost price breaks. Remember to usethe corresponding H for each price.A small manufacturing firm uses roughly 3,400 pounds of chemical dye a year. Currently the firmpurchases 300 pounds per order and pays $3 per pound. The supplier has just announced that ordersof…
- Suppose this information is available for PepsiCo, Inc. for 2015, 2016, and 2017. (in millions) 2015 2016 2017 Beginning inventory $ 2,100 $ 2,400 $ 2,300 Ending inventory 2,400 2,300 2,700 Cost of goods sold 18,227 20,071 20,478 Sales revenue 39,145 42,957 44,066 Calculate the days in inventory for PepsiCo, Inc. for 2015, 2016, and 2017. (Round days in inventory to 1 decimal place, e.g. 5.1.) 2015 2016 2017 Days in inventory daysThe annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. What is the optimal order quantity, given the following price breaks for purchasing the item? What price should the firm pay per unit? What is the total annual cost at the optimal behavior? Quantity Price 1 – 9 $2.95 per unit 10 – 999 $2.50 per unit 1,000 – 4,999 $2.30 per unit 5,000 or more $1.85 per unitThe Hawkins Supply Company is currently faced with an inventory rotation problem. This difficulty stems from the fact that some supplies must be used prior to a stated expiration date. Upon receipt, a new shipment of these perishable items must be stacked beneath the boxes that are currently in inventory. A substantial amount of time is consumed in restacking the items according to their expiration dates.The company would like to reduce the double and sometimes triple handling of items. How can this goal be achieved? Are there alternative solutions which might also be effective?