The SAR company distributes a wide range of electrical products. One of its best selling item is a standard electric motor. The purchasing cost of each electric motor is $100. The management of the SAR company uses the Economic Order Quantity (EOQ) decision model to determine the optimal number of motors to order. Management now wants to determine how much safety stock to hold. Moreover, the SAR company estimates annual demand (320 days to be 64,000 motors). The lead time for an order is 1 week. The annual holding cost of one motor is $15. The ordering cost is $ 6,400 per purchase order. Management has to estimate that the additional stock-out cost is $30 for each motor they are short. Moreover, the company has a minimum required return on investment of around 5%. The SAR company has analyzed the demand during 100 past reorder periods. The records indicate the following pattern Demand (units) during lead time Number of times quantity was demanded 1200 10 1300 1400 1500 1600 15 50 20 5
The SAR company distributes a wide range of electrical products. One of its best selling item is a standard electric motor. The purchasing cost of each electric motor is $100. The management of the SAR company uses the Economic Order Quantity (EOQ) decision model to determine the optimal number of motors to order. Management now wants to determine how much safety stock to hold. Moreover, the SAR company estimates annual demand (320 days to be 64,000 motors). The lead time for an order is 1 week. The annual holding cost of one motor is $15. The ordering cost is $ 6,400 per purchase order. Management has to estimate that the additional stock-out cost is $30 for each motor they are short. Moreover, the company has a minimum required return on investment of around 5%. The SAR company has analyzed the demand during 100 past reorder periods. The records indicate the following pattern Demand (units) during lead time Number of times quantity was demanded 1200 10 1300 1400 1500 1600 15 50 20 5
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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