Search 13:53 EXERCISE 1 A hospital needs daily 10 units of a product, during the
ID: 410454 • Letter: S
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Search 13:53 EXERCISE 1 A hospital needs daily 10 units of a product, during the 365 days of the year The holding cost of this product in stock is Ch-4,5 /unit, and the cost to prepare one order is Co-6 . The lead time is LT 6 days a) Can we accept out of stock in this case? b) If we decide a safety stock of one week, what is the level of this stock? Calculate the Economic Order Quantity one year Calculate the reorder point. ) Calculate the number of orders to prepare in )Say the time or frequency between orders ) Draw the evolution of the stock in time EXERCISE 2. A company needs 175,000 units per year of a product. Each unit costs 6 and the cost of the orders to the suppliers is 20. The holding cost of stock represents 10 per cent per annum Calculate in one year a Economic Order Quantity b.Average of stock c Number of orders to do d. Total item cost e. Total ordering cost Total holding cost g. Total cost of Stock Management (e f)Explanation / Answer
1. Given:
a)You cannot accept out of stock as you are using it daily and the lead time is 6 days.
b) Safety stock represents a buffer against any uncertainity and helps in preventing stockouts if any uncertainity occurs. The easiest formula to calculate safety stock is,
Safety stock = weighted monthly usage during lead time x 0.5
Weighted monthly usage = current usage per day x month = 10 x 365 =3650/12= 304.167units
WMU during lead time = WMU x lead times in months
= 304.167 x (lead time in days/ 30.55 days/month)
=304.167 x (6/30.55) =59.73 units
safety stock=59.73 x 0.5= 29.865units
c. Economic order quantity= Square root of (2 times A times P divided by S)
where A is estimated annual usage, P=set up cost, S=carrying cost
=square root of ((2 x 3650 x 6)/ 4.5)
=98.66 units
d.number of orders per year will be 3650/98.66= 36.996 orders
e. reorder point= safety stock + wmu during leadtime
= 29.865 + 59.73 units = 89.56 units
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