Geox Ltd buys shoes from a supplier in Italy and sells them on to retailers in Australia. Geox Ltd currently uses an EOQ model to determine the number of shoes to send to order. The annual demand for shoes is approximately 45,600. The ordering cost is $55 per order. The annual cost of physically storing shoes is $8.75 per unit. The insurance on the inventory (shoes) cost is $4.25 per unit. The opportunity cost (annual ROI 25% x $30) is $7.50 per unit. The accountant of Geox Ltd, Richard Branson, recently attended a seminar on Just-in-Time (JIT) and is considering how the ideas of JIT differ from traditional techniques like EOQ and how they may help to manage inventory more efficient
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Geox Ltd buys shoes from a supplier in Italy and sells them on to retailers in Australia. Geox Ltd currently uses an EOQ model to determine the number of shoes to send to order.
The annual demand for shoes is approximately 45,600.
The ordering cost is $55 per order.
The annual cost of physically storing shoes is $8.75 per unit.
The insurance on the inventory (shoes) cost is $4.25 per unit.
The opportunity cost (annual
The accountant of Geox Ltd, Richard Branson, recently attended a seminar on Just-in-Time (JIT) and is considering how the ideas of JIT differ from traditional techniques like EOQ and how they may help to manage inventory more efficiently.
REQUIRED:
A) Use the EOQ model to determine the optimal number of shoes per order. (show calculations)
B) If it takes two weeks to receive an order, at what point should Geox Ltd reorder shoes? (show calculations)
C) Geox Ltd has determined that demand may vary from the average by up to 25%. To handle the variation in demand, Geox Ltd has decided that it should maintain enough safety stock to cover any demand level. How much safety stock should the Sydney warehouse hold? How will this affect the reorder point and reorder quantity? (show calculations)
D) Briefly outline what is a Just-in-Time system and explain why inventory holding cost can be regarded as being underestimated traditionally, providing examples of component parts of that cost.
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