The Thrifty Computer Company is trying to decide which of several lot-sizing pro

Question

The Thrifty Computer Company is trying to decide which of several lot-sizing procedures to use for its MRP system. The following information pertains to one of the typical component parts: Setup cost = $150/order. Inventory holding cost = $1.35/unit/week. Current inventory balance 10 units. X 36 Week 12 3 45 6 78 Demand Forecast 2X 65 3x 110 6X 25 85 X Apply the EOQ, (only integer multiples of the EOQ can be ordered), POQ, and PPB lot- sizing procedures and show the total cost resulting from each procedure. Calculate inventory carrying cost based on the average inventory on hand at the end of each period. Assume orders are received into the beginning inventory

Explanation / Answer

EOQ

Average net requirement (Da) = 88.375

EOQ = sqrt(2*88.375*150/1.35) = 141

POQ

EOQ=141

TBO = EOQ / Da = 141 / 88.4 = 1.6 periods or 2 periods

PPB

Step-1: Find the replenishment plans

Step-2: Find the Cost

Out of the 3 methods, POQ gives the lease cost.

Wk1 Wk2 Wk3 Wk4 Wk5 Wk6 Wk7 Wk8 Gross requirement 72 65 108 110 216 25 85 36 Projected On-hand 10 0 0 0 0 0 0 0 0 Net requirement 62 65 108 110 216 25 85 36

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