Bart’s Barometer Business (BBB) is a retail outlet that deals exclusively with weather equipment. Currently BBB is trying to decide on an inventory and reorder policy for home barometers. These cost BBB $60 each and demand is about 1200 per year distributed fairly evenly throughout the year. Reordering costs are $50 per order and holding costs are figured at 20% of the cost of the item. BBB is open 300 days a year (6 days a week and closed two weeks in August). Lead time is 60 working days. a.Develop a total cost model for this system. b. What is the optimal reorder quantity? c. What is the cycle time?

Bart’s Barometer Business (BBB) is a retail outlet that deals exclusively with weather equipment. Currently BBB is trying to decide on an inventory and reorder policy for home barometers. These cost BBB $60 each and demand is about 1200 per year distributed fairly evenly throughout the year. Reordering costs are $50 per order and holding costs are figured at 20% of the cost of the item. BBB is open 300 days a year (6 days a week and closed two weeks in August). Lead time is 60 working days. a.Develop a total cost model for this system. b. What is the optimal reorder quantity? c. What is the cycle time?

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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Custom Computers, Inc. assembles custom home computer systems. The heat sinks needed are bought for $12 each and are ordered in quantities of 1300 units. Annual demand is 5200 heat sinks, the annual inventory holding cost rate is $3 per unit, and the cost to place an order is estimated to be $50. Calculate the following: (a) Average inventory level (b) The number of orders placed per year (c) The total annual inventory holding cost (d) The total annual ordering cost (e) The total annual cost
NTC Co. uses about 200,000 yards of a particular fabric each year. The fabric costs P25 per yard. The current policy is to order the fabric four times a year. Incremental ordering costs are about P200 per order, and incremental carrying costs are about P0.75 per yard, much of which represents the opportunity cost of the funds tied up in inventory. How much total annual costs are associated with the current inventory policy?
Hayes electronics assumed with certainty that the ordering cost is $450 per order and the inventory carrying cost is $170 per unit per year. However, the inventory model parameters are frequently only estimates that are subject to some degree of uncertainty. Consider four cases of variation in the model parameters as follows: (a) both ordering cost and carrying cost are 10% less that originally estimated, (b) both ordering cost and carrying cost are 10% higher than originally estimated, (c) ordering cost is 10% higher and carrying cost is 10% lower than originally estimated, and (d) ordering cost is 10% lower and carrying cost is 10% higher than originally estimated. Determine the optimal order quantity and total inventory cost for each of the four cases. Prepare a table with values from all four cases and compare the sensitivity of the model solution to changes in parameter values.