3. A company orders a single inventory item from an external supplier. The compa

Question

3. A company orders a single inventory item from an external supplier. The company anticipates the following monthly demands for this item over the next eight months: 20, 15, 35, 20, 10, 55, 25, and 10 The company currently has 4 units in stock. At the end of month 8 they require an ending inventory of 2 units. Each order placed by the company costs $50. The company estimates that its holding cost is 81 per unit per month. Due to the high demand for this product from other purchasers, the supplier has a imposed a limit of 30 units per month. The company seeks a planned order release schedule for this item. (a) Demonstrate that a feasible solution to this problem exists (b) Provide an initial feasible solution. (c) Using the procedure from the textbook, find an improved solution.

Explanation / Answer

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Total Demand 20 15 35 20 10 55 25 10 190 Opening 4 Closing 2 D Net requirement 188 K Order cost 50 h Holding cost 12 Q Economic lot size 39.58114029 units Sqtr((2*Annual Demand*order cost)/Annual inventory carrying cost) (sqrt(2*KD/h) Avg S Avg Stock (Q/2) 19.79057015 20 N Optimal no of orders 4.749736835 (Demand/EOQ) 5 DBO Days between order 240 (Days/N) 50.52911526 51 Days OC Ordering cost (KD/Q) 237.49 HC Holding cost (hQ/2)) 237.49 TC Grand Total 474.97 Order 40 40 40 40 40 Inv 20 45 50 30 60 5 20 10

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