What are the important EOQ assumptions and comment if these assumptions are realistic in a real-world situation.
What are the important EOQ assumptions and comment if these
assumptions are realistic in a real-world situation.
(c) CalcCo is a manufacturer of calculators, currently producing 200 per
week. One component for every calculator is a liquid crystal display
(LCD), which the company purchases from LCDCo for £1 per LCD.
CalcCo management wants to avoid any shortage of LCDs, since this
would disrupt production, so LCDCo guarantees a delivery time of 0.5
weeks on each order. The placement of each order is estimated to
require 1 hour of clerical time, with a direct cost of £15 per hour plus
overhead costs of another £5 per hour.
What should be the Economic Order Quantity (EOQ), the reorder point
(assume no safety stock) and the TC? To ensure production continuity
CalcCo determined that the standard deviation of the lead time
demand is 20 LCDs. To ensure a 90% confidence of production
continuity the company has decided to introduce a safety stock. What
is this stock and re-calculate the order point.
(d) Explain how Monte Carlo Simulation could be used to improve
estimates and show how this could be applied.
![This question concerns Ordering processing.
(a) Study the two-inventory cycle representations in Figure 2.1.
The first shows a theoretical profile; describe the operating level, the
safety level, the procurement cycle, the procurement lead time, and the
procurement level and safety stock. The second is a representation of an
actual inventory cycle,
Comment on the differences between the two profiles and provide an
analysis on how you would better manage the company with the second
profile.
Procurement
Icad time
EOQ
-Reorder cycle -
Receipt of suppliers
Peak
Consumption
inventory
Order
point
Order
point
Operating
level
Issaes
Safety
stock
Zero stock
Periods of time. days
Notes:
Consumption
. Inventory is at
Level A
2.... Inventory has been
reduced to B where
B is the reorder point
The order arrives and
replenishes the stock
to Level of C
Inventery
level
Inventory
Zero stock
Time
Stock-out
Lead
Backorders
time
Figure 2.1
Quantity of items in stock
Quantity of items in stock
Receipts (Q)
Receipts (Q)
(0) sidrasa
Receipts (Q)
Receipts (Q)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc3598876-d6b4-46fd-a460-248500117342%2F1728012b-f696-4320-9c34-9434f51727a7%2F93b6hrr_processed.png&w=3840&q=75)
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