The possible course of action for Person LJ. Case summary: Person LJ thought that her Company AT is going to land in a contract at last with Company SI. Person TS at Company SI is responsible for awarding the contract to Person LJ. Person TS was not convinced with the fact Company AT was using the components of their competitor. Person TS asked Person LJ to replace their components with Company SI components if she needs the contract. Purchasing ethics: Purchasing professionals are a vital asset to an organization. The process involved in purchasing items for a company is vital for its success. A strict code of ethics is essential for the purchasing department to ensure that all vendors are treated equally.

Question

The annual demand for water bottles at Mega Stores is 500 units, with an ordering cost of Rs. 200 per order. If the annual inventory holding cost is estimated to be 20%. of unit cost, how frequently should he replenish his stocks? Further, suppose the supplier offers him a discount on bulk ordering as given below. Can the manager reduce his costs by taking advantage of either of these discounts? Recommend the best ordering policy for the store. Order size Unit cost (Rs.) 1 – 49 pcs. 20.00 50 – 149 pcs. 19.50 150 – 299 pcs. 19.00 300 pcs. or more 18.00

Answer 1

Question

Chapter C, Problem 5.2SB

Summary Introduction

To explain: The possible course of action for Person LJ.

Case summary:

Person LJ thought that her Company AT is going to land in a contract at last with Company SI. Person TS at Company SI is responsible for awarding the contract to Person LJ. Person TS was not convinced with the fact Company AT was using the components of their competitor. Person TS asked Person LJ to replace their components with Company SI components if she needs the contract.

Purchasing ethics:

Purchasing professionals are a vital asset to an organization. The process involved in purchasing items for a company is vital for its success. A strict code of ethics is essential for the purchasing department to ensure that all vendors are treated equally.

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The annual demand for water bottles at Mega Stores is 500 units, with an ordering cost of Rs. 200 per order. If the annual inventory holding cost is estimated to be 20%. of unit cost, how frequently should he replenish his stocks? Further, suppose the supplier offers him a discount on bulk ordering as given below. Can the manager reduce his costs by taking advantage of either of these discounts? Recommend the best ordering policy for the store. Order size Unit cost (Rs.) 1 – 49 pcs. 20.00 50 – 149 pcs. 19.50 150 – 299 pcs. 19.00 300 pcs. or more 18.00

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