Assignment #2 NEW (2)

docx

School

Conestoga College *

*We aren’t endorsed by this school

Course

8085

Subject

Business

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by CommodoreSteelHedgehog34

Assignment 2 Subject Name : Applied Operation Management - QUAL8085 Student Name : Tejas Wagh Divyang Modi Parth Panchal Nirav Panchal

Report : Procurement of Copy Paper for Ontario Provincial Government INTRODUCTION : Report observes the probable profits of integrating the procurement of copy paper for several school boards in Ontario state. The analysis concentrations on the cost savings which can be attained by applying EOQ method to procurement. We analyzed the existing state procurement process, valued the total purchasing costs, and compared them with the entire purchasing costs of a centralized process using the EOQ method. We considered the effect of the lead time on the procurement process as well as planned safety inventory levels to confirm a service level of 95% order fulfillment. Current State Analysis : Presently, each school board acquires copy paper autonomously. The table below shows each school board's monthly consumption, order size, order cost, and monthly order volume. School Board Monthly Usage Cost of Placing an Order Current Order Size A 500 $1000 1500 B 200 $800 400 C 300 $900 300 D 400 $1000 1600 E 600 $1200 900 F 100 $400 300 G 200 $1000 200

Assumptions while calculations:  Annual demand is assumed to be 12 months * monthly usage  Holding cost is $2 per box per year  Order cost is fixed  While Unit price is constant  Lead time is 1 week  Each school board has its own ordering quantity under the current decentralised procurement procedure, which is dependent on its monthly usage, order cost, and current order size.  A box of paper costs $60 to buy and costs $2 to hold on to each year. The following is how we determined each school board's overall purchasing expenditures using the provided data: School Board A : 1. Annual demand = 500 boxes per month * 12 months = 6,000 boxes 2. Order quantity = 1500 boxes 3. No. of orders = 6,000 boxes / 1,500 boxes = 4 orders/year 4. Annual ordering cost = 4 orders per year * $1,000 per order = $4,000 5. Annual holding cost = 1,500 boxes divide by 2 x $2 per box = $1,500 6. Total annual purchasing cost = (6,000 boxes * $60 per box) + $4,000 + $1,500 = $365500 Likewise, this is a calculation of the total cost of purchase for other school boards: School Board Total Purchasing Cost A 365,500 B 149,200 C 227,100 D 292,600 E 442,200 F 73,900 G 156,200 For all school boards combined, the cost of purchases is $1,707,000.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Applying centralizing Economic Order Quantities: To calculate the economic order quantity for each school board, we use the formula: EOQ = √(2SR/H ) Where R : Annual demand S : cost of placing an order H : Holding cost per unit. With the given values, we obtain: School Board EOQ(Boxes) A 2450 B 1386 C 1800 D 2191 E 2939 F 693 G 1549 Tc (min) = √ 2 SRH + CR = $1,682,015 Average Fixed Cost = $900  Centralized Procurement with EOQ and Safety Inventory:  The overall yearly demand, under the assumption of a centralised procurement with EOQ, would be the total annual demand for all school boards, which comes to 27,600 boxes. The EOQ for centralised procurement can be computed using the provided order cost as follows: Centralized Procurement EOQ = sqrt((2 * total annual demand * order cost) / holding cost) Centralized Procurement EOQ = 4,984  A safety inventory must be established in order to guarantee a service level of 95% order fulfilment. You can compute the safety inventory as follows: Safety Inventory = z-score * sqrt(lead time demand variance) * unit cost

 We must take into account the lead time demand and the safety stock required to reach a service level of 95% when calculating the reorder point with safety stock. The additional inventory kept as a buffer to assure that demand during the lead period is met with a given likelihood is known as the safety stock. Where the z-score corresponds to the desired service level, that is 1.65. For the centralized option, the average daily demand = 27600 / 365 = 76 boxes per day. The lead time is 1 week or 7 days, the standard deviation of the lead time demand is 50 boxes. Now, according to the calculation above, is: Reorder point = (76 * 7) + (1.65 * 50) = 614 boxes Therefore, the recommendation is to maintain a safety stock of 614 boxes to ensure a service level of 95% order fulfillment to the schools. In conclusion, the research suggests that the seven school boards centralise their copy-paper purchasing. The entire cost of the purchases, according to the present ordering procedure, is $1,707,000 . The total cost of purchasing can be lowered to $1,682,015 by using the economic order quantity model. In order to achieve cost savings and guarantee a high level of service to schools, it is advised to centralise the purchase of copy paper and to adopt the economic order quantity model along with safety stock.

Related Documents

ISSC457_Week3_Assignment_Ocasio_Miguel.doc

PAD 345 Module Six Graphic Organizer.docx

BUSI 601-07-GROUP 8 - Volkswagen case study.docx

ISSC457_Week5_Assignment_Ocasio_Miguel.doc

ISSC457_Week2_Assignment_Ocasio_Miguel.doc

SOSC225-InformalCareerPlan.docx

MUSEUM VISIT TO MBA updated.docx

Wk 1 forum.docx

RealEstateFirm_Scenario.docx

DMAIC Table Assignment.docx

LEC - Supply Chain Management Assignment.docx

Blog discussion 7.pdf

Recommended textbooks for you

Purchasing and Supply Chain Management

Operations Management

ISBN:9781285869681

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

Publisher:Cengage Learning

Marketing

ISBN:9780357033791

Author:Pride, William M

Publisher:South Western Educational Publishing

MARKETING 2018

Marketing

ISBN:9780357033753

Author:Pride

Publisher:CENGAGE L

SEE MORE TEXTBOOKS

Recommended textbooks for you

Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Marketing
Marketing
ISBN:9780357033791
Author:Pride, William M
Publisher:South Western Educational Publishing
MARKETING 2018
Marketing
ISBN:9780357033753
Author:Pride
Publisher:CENGAGE L

Purchasing and Supply Chain Management

Operations Management

ISBN:9781285869681

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

Publisher:Cengage Learning

Marketing

ISBN:9780357033791

Author:Pride, William M

Publisher:South Western Educational Publishing

MARKETING 2018

Marketing

ISBN:9780357033753

Author:Pride

Publisher:CENGAGE L

SEE MORE TEXTBOOKS