UPD Manufacturing produces a range of health care appliances for hospital as well as for home use. The company has experienced a steady demand for its products, which are highly regarded in the health care field. Recently the company has undertaken a review of its inventory ordering procedures as part of a larger effort to reduce costs. One of the company's products is a blood pressure testing kit. UPD manufactures all of the components for the kit in-house except for the digital display unit. The display units are ordered at six-week intervals from the supplier. This ordering system began about five years ago, because the supplier insisted on it. However, that supplier was bought out by another supplier about a year ago, and the six-week ordering requirement is no longer in place. Nonetheless, UPD has continued to use the six-week ordering policy. According to purchasing manager Tom Chambers, “Unless somebody can give me a reason for changing, I'm going to stick with what we've been doing. I don't have time to reinvent the wheel.”Further discussions with Tom revealed a cost of $32 to order and receive a shipment of display units from the supplier. The company assembles 89 kits a week. Also, information from Sara James, in Accounting, indicated a weekly carrying cost of $.08 for each display unit. The supplier has been quite reliable with deliveries; orders are received five working days after they are faxed to the supplier. Tom indicated that as far as he was concerned, lead-time variability is virtually nonexistent. Questions: (a). Would using an order interval other than every six weeks reduce costs? If so, what order interval would be best, and what order size would that involve? (b). Would you recommend changing to the optimal order interval? Explain.
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.
UPD Manufacturing produces a range of health care appliances for hospital as well as for home use. The company has experienced a steady demand for its products, which are highly regarded in the health care field. Recently the company has undertaken a review of its inventory ordering procedures as part of a larger effort to reduce costs. One of the company's products is a blood pressure testing kit. UPD manufactures all of the components for the kit in-house except for the digital display unit. The display units are ordered at six-week intervals from the supplier. This ordering system began about five years ago, because the supplier insisted on it. However, that supplier was bought out by another supplier about a year ago, and the six-week ordering requirement is no longer in place. Nonetheless, UPD has continued to use the six-week ordering policy. According to purchasing manager Tom Chambers, “Unless somebody can give me a reason for changing, I'm going to stick with what we've been doing. I don't have time to reinvent the wheel.”Further discussions with Tom revealed a cost of $32 to order and receive a shipment of display units from the supplier. The company assembles 89 kits a week. Also, information from Sara James, in Accounting, indicated a weekly carrying cost of $.08 for each display unit. The supplier has been quite reliable with deliveries; orders are received five working days after they are faxed to the supplier. Tom indicated that as far as he was concerned, lead-time variability is virtually nonexistent. Questions: (a). Would using an order interval other than every six weeks reduce costs? If so, what order interval would be best, and what order size would that involve? (b). Would you recommend changing to the optimal order interval? Explain.
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Hello, can you give me more qualitative reasoning and answer on this question on top of the calculation, please? Thank you.
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