Inventory Exercises
Inventory Exercises
1. At Dot Com, a large retailer of popular books, demand is constant at 32,000 books per ear. The cost of placing an order to replenish stock is $10 and the annual cost of holding is $4 per book. Stock is received five working days after an order has been placed. No backordering is allowed. Assume 300 working days a year.
a. What is Dot Com’s optimal order quantity (EOQ)?
b. What is the optimal number of order per year?
c. What is the optimal interval (in working days) between orders?
d. What is the demand during the lead time?
2. Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its SKUs at a constant rate of 30,000 units per year. It costs Leaky Pipe $10 to process an order to replenish stock and $1 per unit per year to carry the item in stock. Stock is received four working days after an order is placed. No backordering is allowed. Assume 300 working days a year.
a. What is Leaky Pipe’s optimal order quantity?
b. What is the optimal number of order per year?
c. What is the optimal interval (in working days) between orders?
d. What is the demand during the lead time?
3. Sam’s Cat Hotel operates 52 weeks per year, 6 day per week, and uses a continuous review inventory system. It purchase kitty litter for $11.70 per bag. The following information is available:
Demand = 90 bags/week
Order Cost = $54/order
Annual holding cost = 27 percent of cost
Desired cycle service level = 80 percent
Lead time = 3 weeks (18 working days)
Standard deviation of weekly demand = 15 bags
a. What is the EOQ? What would be the average time between orders (in weeks)?
b. What should Reorder Point be? Reorder point requires sufficient inventory to meet demand that would occur during lead time in addition to a safety stock.
The safety stock protects from fluctuations/deviations in demand that might occur. It is calculated in the following manner. Standard deviation of weekly demand times the square root
1. At Dot Com, a large retailer of popular books, demand is constant at 32,000 books per ear. The cost of placing an order to replenish stock is $10 and the annual cost of holding is $4 per book. Stock is received five working days after an order has been placed. No backordering is allowed. Assume 300 working days a year.
a. What is Dot Com’s optimal order quantity (EOQ)?
b. What is the optimal number of order per year?
c. What is the optimal interval (in working days) between orders?
d. What is the demand during the lead time?
2. Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its SKUs at a constant rate of 30,000 units per year. It costs Leaky Pipe $10 to process an order to replenish stock and $1 per unit per year to carry the item in stock. Stock is received four working days after an order is placed. No backordering is allowed. Assume 300 working days a year.
a. What is Leaky Pipe’s optimal order quantity?
b. What is the optimal number of order per year?
c. What is the optimal interval (in working days) between orders?
d. What is the demand during the lead time?
3. Sam’s Cat Hotel operates 52 weeks per year, 6 day per week, and uses a continuous review inventory system. It purchase kitty litter for $11.70 per bag. The following information is available:
Demand = 90 bags/week
Order Cost = $54/order
Annual holding cost = 27 percent of cost
Desired cycle service level = 80 percent
Lead time = 3 weeks (18 working days)
Standard deviation of weekly demand = 15 bags
a. What is the EOQ? What would be the average time between orders (in weeks)?
b. What should Reorder Point be? Reorder point requires sufficient inventory to meet demand that would occur during lead time in addition to a safety stock.
The safety stock protects from fluctuations/deviations in demand that might occur. It is calculated in the following manner. Standard deviation of weekly demand times the square root