Suppose demand is know and constant at 500 units per year (one year has 250 working days). The holding cost is $2 per unit per year and the ordering cost is $20 per order. Also assume that the lead time is 10 days. Compute the optimal order quantity (EOQ) and the optimal annual inventory cost. Draw a picture of the evolution of the inventory level with time. Indicate the ROP on the picture as well as the length of the cycle. Now assume that the lead time is 90 days. Indicate the ROP on the picture.

Suppose demand is know and constant at 500 units per year (one year has 250 working days). The holding cost is $2 per unit per year and the ordering cost is $20 per order. Also assume that the lead time is 10 days. Compute the optimal order quantity (EOQ) and the optimal annual inventory cost. Draw a picture of the evolution of the inventory level with time. Indicate the ROP on the picture as well as the length of the cycle. Now assume that the lead time is 90 days. Indicate the ROP on the picture.

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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The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.
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