model with backorders. C. All-unit quantity discount can be adopted in POQ model. D. Basic EOQ model assumes the purchasing lead time is about one week. E. About ABC analysis‚ class B Items needs to be moderately controlled. ____ 2. For product M‚ a firm has an annual holding cost percentage of 20%‚ an ordering cost of $80 per order‚ and annual demand of 10‚000 units. If they order less than 1‚100 units at a time‚ the purchase price is $10.00. If they order 1‚100 or more‚ then the purchase
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proposed on SCC such as “the order‚ forecasting‚ procurement‚ and information sharing procedures among the members of the supply chain” (Therese M. Flaherty‚ 1996) and “SCC is concerned with managing dependencies between various supply chain members and the joint efforts of all supply chain members to achieve mutually defined goals” (Arshinder‚ Arunda Kapur‚ 2007). According to (Omkar D. Palsule-Desai 2012) a SC is perfectly coordinated when the decisions on optimal quantity to be ordered by retailer
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variable. In order for Reebok to have successful and efficient inventory planning‚ Reebok should reach an optimal order quantity that would balance both overage and underage cost. The ultimate goal for Reebok should be to maximize profit‚ which will be achieved through balancing out these costs. Reebok should also try to meet high service level if the underage cost associated is high. As you can see from Exhibit 2‚ the mean demand for blank jerseys 23‚275 but the optimal quantity is 24‚178. Because
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of Business and Economics International Executive Master of Finance and Control 20 April 2012 Course – Logistics Prof. Dr. Allard van Riel Pauline Henselmans Jetse van de Kamp Ze Zhu Thiago Barros de Oliveira Rene Lorrier Contents 1. Reasons for the increase in variability in demand in Barilla’s supply chain 3 1.1 Distributed inventories‚ local optimization 3 1.2 Lack of inventory information and sales forecast information 3 1.3 Promotions and quantity discounts 4 1
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As the production manager‚ you need to minimize both ordering and inventory costs. You need to provide a recommendation of the optimal order quantity of raw materials to your plant manager. Your objective is to determine the economic order quantity (EOQ). If the annual demand for Ultamyacin at Smitheford is 400‚000 units‚ then the annual carrying cost rate is 15% of the cost of the unit. The product costs $48/unit to purchase‚ and the product ordering cost is $28.00". Given: Demand or Annual inventory
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problems are how to forecast the future demand with limited uncertainty as well as would that be too risky if increasing production in China due to China’s larger minimum order requirement and intense trade relationship with US. To solve those problems‚ we can first lay out what information and conditions we have: The minimum order quantity is 600 in Hong Kong and 1200 in China. The average cost of producing in Hong Kong and China is $60.08 and $51.92 respectively. The expected profit is 24% of wholesale
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period by period basis‚ the holding cost would be the function of the maximum quantity hold during a period‚ especially when the carrying cost increase significantly along with the quantity‚ such as the insurance cost. Also‚ there are some products take up great space such as automobiles‚ ships and airplanes‚ each pieces need a certain amount of space‚ which makes the cost higher along with the increase of product quantity. b. Since the holding cost=rv∙Imax=rvQ‚ TRC=ADQ+rvQ ∂TRC∂Q=ADQ2+rv=0‚ we can
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option. Calculations: All the calculations for Economic order quantity‚ Reorder Point and Safety stock are given in appendix 2. The EOQ is calculated using the standard EOQ formula. For the formula we take the fixed costs to be the cost that is paid at the ports for order processing. This cost is 335 for Rotterdam and 305 for Zaragoza. For calculating the reorder point we first calculated the average performance time. This includes time spent by the order on port‚ Time spent on sea and the delivery
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As there is no demand variability‚ the formula for quantity is: Q = d (LT + OI) – A (as there is no safety stock) ------- A - ROP (Reorder point) We know‚ A = d * LT‚ so the fixed order interval order quantity equation Q becomes Q = (d * LT) + (d * OI) – (d * LT) * Q = d * OI = (6) (89) = 534 units Therefore‚ ordering at six-week intervals requires an order quantity of 534 units. Now‚ the optimal order quantity is determined by using EOQ equation. Q = sqrt(2dS/H)
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Decision Making Models A – A1. Economic Order Quantity Model (EOQ) The Economic Order Quantity Model will allow an organization to determine the optimal volume of inventory to order at a given time. The EOQ model provides the most optimized approach to inventory ordering as it considers‚ demand‚ ordering cost‚ and holding costs; to develop the volume of inventory to be ordered to maintain to minimum annual cost (Render‚ 2012). Equation: Variables: Q* = optimal number to order D = annual demand in units
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