normally distributed with a standard deviation of weekly demand of 100 units. Current on-hand inventory is 1.040 units with no scheduled receipts and no backorders. 1. Calculate the item’s EOQ. What is the average time‚ in weeks between orders? EOQ = (2DS)/H EOQ = (2*20000*40)/2 EOQ = 800000 EOQ = 894.43894 TBO = (EOQ/D)*52weeks TBO = (894/20000)*52weeks TBO = (0.0447)*52weeks TBO = 2.32442.32weeks 2. Find the safety stock and reorder point that provide a 95% cycle-service level. Safety stock
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not inventories in the Nigeria Bottling Company‚ Ilorin Plant can be evaluated and understood using the various existing tools of optimization in inventory management. The study methods employed include the variance analysis‚ Economic Order Quantity (EOQ) Model and the Chi-square method. The answer to the fundamental question of how best an organization which handles inventory can be efficiently run is provided for in the analysis and findings of the study. Consequently‚ recommendations on the right
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rational policies to balance between holding cost and demand. One such policy is ordering ECONOMIC ORDER QUQNTITY for stock replenishment at this point holding cost reduces significantly and total annual inventory cost is lowest. Though maintaining exact EOQ is sometime not possible working in the vicinity of it results in lower total annual inventory cost. Holding cost is straight line that is it directly varies with ordering quantity
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2 EOQ Model The first model we will present is called the economic order quantity (EOQ) model. This model is studied first owing to its simplicity. Simplicity and restrictive modeling assumptions usually go together‚ and the EOQ model is not an exception. However‚ the presence of these modeling assumptions does not mean that the model cannot be used in practice. There are many situations in which this model will produce good results. For example‚ these models have been effectively employed
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Case Report: Jamie CHANG 1. Based on the assumption that all data collected are accurate and the methods used to collect are reliable‚ the EOQ calculations are correct. Given by the EOQ model‚ the optimal Q (quantity of an order) is set by the equation Oopt=[2(Demand Rate)(Order Setup Cost)/(Holding Cost Rate)]^(1/2). In this case‚ order setup cost=setup hours per order × setup cost per hour; holding cost rate= 30% × product unit cost. 2. Jamie Change only shows the optimal inventory levels for
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Question 1: Using the EOQ methods outlined in Chapter 9‚ determine how many kegs of nails Low should order at one time. Question 2: Assume that all conditions in Question 1 hold‚ except that Low’s supplier now offers a quantity discount in the form of absorbing all or part of Low’s order-processing costs. For orders of 750 or more kegs of nails‚ the supplier will absorb all order-processing costs; for orders between 249 and 749 kegs‚ the supplier will absorb half. What is Low’s new EOQ? (It might be useful
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44:2‚ 219–233. Harris‚ F. M. (1913) “How Many Parts to Make at Once‚” Factory‚ The Magazine of Management 10:2‚ 135–136‚ 152. Reprinted in Operations Research 38:6 (1990)‚ 947–950. Lowe‚ T. J. and L. B. Schwarz. (1983) “Parameter Estimation for the EOQ Lot-Size Model: Minimax and Expected-Value Choices‚” Naval Research Logistics Quarterly‚ 30‚ 367–376. S chwarz‚ L. B. (1972) “Economic Order Quantities for Products with Finite Demand Horizons‚” AIIE Transactions 4:3‚ 234–237. Zheng‚ Y. S. (1992) “On
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Carl’s Computers Case analysis: 1. Using the data on the two part numbers given‚ provide a comprehensive evaluation of the ordering policies. Compare the present annual average cost with the cost of using a system such as EOQ‚ and discuss any other order policies as appropriate. A233 circuit board: Average weekly usage = 32 units A (Annual demand) = 32 units *52 week = 1664 units Lead time = 1 week c (unit cost) = $18 i = 23% 23% inventory holding cost: $18 *23% = $4.14 S (order cost)
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weaknesses. Here I will suggest some solutions to help solve the problems faced in their inventory management processes. Starbucks follows the EOQ model‚ which involves heavy calculations and predictions. Without the formulas and some basic information about the demands from customers‚ the cost of placing orders‚ and other variables‚ the calculation of the EOQ model will not be able to reach its optimal potential. From this‚ collecting the accurate information for the calculations is vital‚ the company
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economic order quantity (EOQ) is the order size that minimizes total annual cost So to respond to the criticism whish say that EOQ models tend to provide misleading results because values of D‚ S and H are at best educated guesses‚ we should explain that first of all the holding cost (H) instead to computed they are determined by management; that’s why the EOQ should be an approximate quantity. In addition as we saw in class that the total cost curve is relatively flat round the EOQ. In other words if
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