Murphy & sons is a company that has contracts to repair pavements for a number of London Boroughs. Demand for its services is constant throughout the year. It uses 48,000 paving slabs each year. The cost of placing an order for paving slabs is £75 and the holding cost per unit of inventory is 45p pa. Suppliers are very reliable and no buffer stock is kept. Required: Calculate i) the batch size at which inventory costs will be minimised; ii) the number of orders that will be placed each year; and iii) the total inventory costs per annum. Critically discuss the limitations of the Economic Order Quantity model as a way of managing stock.
Murphy & sons is a company that has contracts to repair pavements for a number of London Boroughs. Demand for its services is constant throughout the year. It uses 48,000 paving slabs each year. The cost of placing an order for paving slabs is £75 and the holding cost per unit of inventory is 45p pa. Suppliers are very reliable and no buffer stock is kept. Required: Calculate i) the batch size at which inventory costs will be minimised; ii) the number of orders that will be placed each year; and iii) the total inventory costs per annum. Critically discuss the limitations of the Economic Order Quantity model as a way of managing stock.
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter16: Lean Supply Chain Management
Section: Chapter Questions
Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...
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Murphy & sons is a company that has contracts to repair pavements for a number of London Boroughs. Demand for its services is constant throughout the year. It uses 48,000 paving slabs each year. The cost of placing an
order for paving slabs is £75 and the holding cost per unit of inventory is 45p pa. Suppliers are very reliable and no buffer stock is kept.
Required:
Calculate
i) the batch size at which inventory costs will be minimised;
ii) the number of orders that will be placed each year; and
iii) the total inventory costs per annum.
Critically discuss the limitations of the Economic Order Quantity model as a way of managing stock.
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