NFL licensed jersey producer‚ many key decisions must be made to reduce inventory costs in periods of low demand while maximizing profits in periods of high demand for player specific jerseys. Using the newsvendor model to determine the optimal order quantity and leftover inventory‚ we will present a possible approach to inventory planning with uncertain demand. Uncertain Demand: Within the replica jersey industry‚ seasonality plays a vital part in keeping sufficient inventory to cover customer demand
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engine costs $500‚ and Harley incurs uses holding cost of 20 percent. a) How many engines should Harley load onto each truck (i.e. what is the optimal order quantity)? D = 3‚000 S = 1‚000 C = 500 h = 0.2 Q* = SQRT((2DS)/(hC)) = SQRT((2*3000*1000)/(0.2*500)) = SQRT(6000000/100) = 244.979 b) What is the corresponding optimal order frequency? n* = D/Q* = 3000/244.979 = 12.247 c) What is the cycle inventory of engines at Harley? Cycle inventory = Q*/2 = 244.979/2 = 122.474
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$40 per order Annual carrying cost*** 30% Safety stock 2 sets Wright per set 1000 lb Lead time (average) 4 weeks *Excludes freight cost **This cost includes receiving ($20 per order) and paperwork ($20 per order) ***This cost includes the cost of capital (15%)‚ insurance (3%)‚ warehouse space (5%)‚ and obsolescence (7%) Note Shipping cost $10 per cwt* or $9 per cwt if order is at least 10 bedroom Regular order 6 bedroom Discount 2% if order is at least
Free Economic order quantity Safety stock Reorder point
Develop an inventory plan to help ZBC. We will use EOQ Formula in order to derive some data for estimates. Annual demand = D = 439 Cost of Bicycle at whole sale (C) = 0.60*170 = $102 Carrying cost (H) = 12% of cost = 102 *.12 = 12.24 Ordering cost (S) = $65 per order Lead time = 4 weeks Re order point = ROP = daily demand x lead time (days) = 439/365 * 28 = 33.67 EOQ Formula Order quantity Q = Sqrt (2DS / H) = Sqrt ( 2 * 439 * 65 / 102 *.12 )
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= $3059.4 + $3059.4=$6118.8 So‚ except for rounding annual ordering cost and carrying cost equal at the EOQ. IV) TC200= (200/2)*$30+ (10400/200)*60=$3000+$3120=$6120 Office manager should not use the optimal order size instead of 200 boxes because it is 1.2 higher than with EOQ. So 200 boxes is acceptable. 1. b Given that‚ Expected demand during lead time= 300 units Sigma dlt=30 units I) ROP= Average demand during lead time+ safety stock
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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) = $16 per order Q (order quantity) = 64 units Annual purchasing cost = A * c = 1664 * $18 = $29‚952 Annual ordering cost = A/Q *S = 1664/64
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Chapter 13: Determining Optimal Level of Product Availability Exercise Solutions 1. 0.2941 Optimal lot-size == NORMINV(0.2941‚100‚40) = 78.34 Given that p = $200‚ s = $30‚ c = $150: Expected profits = (p – s) NORMDIST((O – )/‚ 0‚ 1‚ 1) – (p – s) NORMDIST((O – )/‚ 0‚ 1‚ 0) – O (c – s) NORMDIST(O‚ ‚ ‚ 1) + O (p – c) [1 – NORMDIST(O‚ ‚ ‚ 1)] = $2‚657 Expected overstock = (O – )NORMDIST((O – )/‚ 0‚ 1‚ 1) + NORMDIST((O – )/‚ 0‚ 1‚ 0) = 7.41 Expected understock = ( – O)[1 –
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Labour‚ overhead‚ meat‚ buns and condiments cost $1 per burger. Demand is normally distributed with a mean of 400 kg per day and a standard deviation of 50 kg per day. What daily order quantity is optimal? 2. A manager is going to purchase new processing equipment and must decide on the number of spare parts to order with the new equipment. The spares cost $200 each‚ and any unused spares will have an expected salvage value of $50 each. The probability of usage of parts can be described by the following
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Obermeyer‚ which has been addressed in Appendices A and B. Appendix A shows how much should be produced in Hong Kong given the assumption that there is no limit to the capacity; however‚ we have been asked to comment only on the initial order quantity‚ and not the reorder quantity. In keeping with this constraint‚ and using the forecasts given by all the committee members‚ we believe that Appendix B is an accurate representation of the amount of each style that should be produced in Hong Kong. It should be
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still perform such upgrade in the long run. Q1b. Should the company build in-store networks? Yes‚ it will remove some redundancies in daily operations. For instance‚ employees no longer have to collect data physically from each POS terminal in order to obtain daily sales totals. In-store network will also enable store managers to have a more comprehensive understanding of sales activities on both a consolidated level and section (Men‚ Women‚ or Children) level. Q1c. Should the company give
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