.Il T-Mobile LTE 1:19 PM blackboard.stevenson.edu Additional Case Study: LaPlace
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.Il T-Mobile LTE 1:19 PM blackboard.stevenson.edu Additional Case Study: LaPlace Power and Light Co. The southeastem Division of LaPlace Power and Light Company is responsible for providing dependable electric service to customers in and around the area of Metairie, Kenner Destrehan, LaPlace, Lutcher, Hammond, Pontchatoula, Amite, and Bogalusa, Louisiana. One material used extensively to provide this service is the 1/0 AWG aluminum triplex cable, which delivers the electricity from the distribution pole to the meter loop on the house. The Southeastern Division Storeroom purchases the cable that this division will use. For the coming year, this division will need 499,500 feet of this service cable. Because this cable is used only on routine service work, practically all of it is installed during the 5 normal workdays. The current cost of this cable is 41.4 cents per foot Under the present arrangement with the supplier, the Southeastern Storeroom must take one twelfth of its annual need every month. This agreement was reached in order to reduce lead time by assuring LaPlace a regular spot on the supplier's production schedule. Without this agreement, the lead time would be about 12 weeks. No quantity discounts are offered on this cable; however, the supplier requires that a minimum of 15,000 feet be on an order. The Southeastern Storeroom has the space to store a maximum of 300,000 feet of 1/0 AWG aluminum service cable. Associated with each shipment are ordering costs of $50, which include all the costs from making the purchase requisitions to issuing a check for payment. In addition, inventory carrying costs (including taxes) on all items are considered to be 10% of the purchase price per unit per year Because the company is a govenment-regulated, investor-owned utility, both the Louisiana Public Service Commission and its stockholders watch dlosely how effectively the 1. Evaluate the effectiveness of the current ordering system. 2. Can the current system be improved?Explanation / Answer
1. the firm is simply ordering the quantity of material based on their utilization rate. they are not considering any other aspects like ordering cost, storage costs, maintanace cost of the item and not looking for any discount from the supplier. based on the lead time 12 weeks they are planning for orders and purcahsing the items. when they have complete demand sheet for the whole year, it is better to prepare order sheet based on monthly or quarterly demand for the product in the market. it helps to them to use their resources more effectively than normal levels.
2. yes, the firm may introduced new systems based on the demand. inventory techniques like EOQ (economic order quantity) material resource planning will help them to plan in more better way than normal way. hence, by considering the above information, it is suggested that if they go with economic order quantity, it helps them to minimize total ordering and holding cost of inventory.
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