MGMT-6085-24W Assignment A2 EOQ

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Fanshawe College *

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6085

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Management

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Apr 3, 2024

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MGMT-6085 Inventory Distribution Management Student Name Student Number Rafat Al Islam 1225742 MGMT-6085-24W - Assignment #2 Module 03 - Chapter 03 EOQ Sam’s Cat Hotel Sam’s Cat Hotel operates 52 weeks per year, 7 days per week, and uses a continuous review inventory system. It purchases Kitty Litter for $16.48 per bag. The following information is available about these bags: Demand 135 bags/week Order Cost $75.50 per order Annual Holding Cost 28.50% of cost Desired Cycle-Service Level 80% Lead Time 3 weeks (21 working days) Standard Deviation of weekly demand 21 bags Current on Hand Inventory 440 bags Open Orders or Backorders 0 SHOW YOUR CALCULATIONS A. What is the Economic Order Quantity (EOQ) for Kitty Litter? EOQ= √ Holding Cost 2×Demand×Order Cost Order cost = 75.5 per order Demand 135 bags/ week Holding Cost=0.2850×16.48 = 4.69 So, EOQ= 65.89

MGMT-6085 Inventory Distribution Management B. What would be the average time between orders (in weeks)? The Average time between Orders = EOQ/D =65.89/135 TBO= 0.487 C. What would the Re-order Point ( R)) be? Re-order point=Demand x Lead Time +Safety Stock Safety stock= Z x SD = .84 x 21 =17.64 135 x 3 + 17.64= 405.64 D. An inventory withdrawal of 60 bags was just made … Is it time to re-order? The formula to determine the remaining inventory is: Remaining Inventory = Current Inventory in hand - Withdrawal = 440 - 60 =380, which is smaller than re-order point 405.64, it is not the time for re-order E. The store currently uses a lot size of 750 bags (Q = 750). What would be the annual cost saved by shifting from the 750 bag lot size to the EOQ? Savings=(Order Cost ×Demand )×(1/Current Qty - 1/EOQ)+current qty × holding cost)/2 – (EOQ x Holding Cost) / 2

MGMT-6085 Inventory Distribution Management (75.50×135)×(1/750−65.891)+(750×4.6908)/2−(65.89×4.6908)/2=1.6 (Saving/annual)

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MGMT-6085-24W Assignment A2 EOQ

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