Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its S
ID: 453490 • Letter: L
Question
Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its SKUs at a constant rate of 18,700 units per year. It costs Leaky Pipe $35 to process an order to replenish stock and $3.00 per unit per year to carry the item in stock. Stock is received 12 working days after an order is placed. No backordering is allowed. Assume 350 working days a year. Leaky Pipe's optimal order quantity is square box units. (Enter your response rounded to the nearest whole number.) The optimal number of orders per year is square box orders. (Enter your response rounded to the nearest whole number.) The optimal interval (in working days) between orders is square box days. (Enter your response rounded to one decimal place.) The demand during lead time is square box units. (Enter your response rounded to the nearest whole number) The reorder point is square box units. (Enter your response rounded to the nearest whole number.) The inventory position immediately after an order has been placed is square box units. (Enter your response rounded to the nearest whole number.)Explanation / Answer
ANNUAL DEMAND, D 18700 UNITS ORDERING COST, O 35 PER ORDER CARRYING COST, C 3 PER UNIT PER YEAR LEAD TIME, L 12 DAYS WORKING DAYS IN A YEAR 350 DAYS a) Optimal Order Quantity = EOQ, Q = sqrt (2*D*O/C) Q 661 units b) Optimal Number of orders per year = D/Q Optimal Number of orders per year 28 c) Optimal interval between orders = 350 days/no. of orders per year Optimal interval between orders 12.4 days d) Demand during Lead Time, dL = daily demand(d)*L dL 641 units e) Reorder point, R = d * L (as no Safety stoock mentioned) R 641 units f) the inventory position immediately after an order has been placed will be the same as the reorder point because that many units are left in the stock when an order is placed hence, inventory position immediately after an order has been placed 641 units
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