Supply Chain questions 4

EOQ Questions

EOQ Assignment
You are the company's Supply Chain Manager -- solve the below questions to ensure an optimal ordering policy.
Annual requirements (R) =	18,000	units		Place EOQ graph here….
Order cost (S) =	$68.00	per order
Holding rate (k) =	32.0%	annually
Unit cost (C) =	$52.87	per unit
Lead time (LT) =	4	days
Number of days per year =	365	days
Compute the following:
Note: You must include formulas for full credit -- do NOT simply type in answers. Add additional cells if necessary, but label each clearly!
a) EOQ =		units
EOQ (rounded to nearest whole item)		units
b) total purchase cost =
c) annual holding cost =
d) annual order cost =
e) total annual logistics cost =		(without purchase cost)
f) reorder point		units (note: no variability in demand or lead-time in this situation)
g) number of orders placed per year =		orders
h) time between orders =		days
i) plot cost curves -- holding cost, order cost and total cost. Use the layout below the questions, if needed.
j) If you are required to order by the whole case, at 50-per case, what Q would you recommend?		units
k) What is the new Total Annual Logistics Cost of the Whole-Case Q?		(suggestion -- you can compute here, or just change your Q above where your EOQ is and see the resulting costs -- don't forget to undo this change to put EOQ back!)
l) What is the difference in Total Annual Logistics Cost of EOQ and that of the Whole-Case Q?
m) Given your answer to l above, what does this say about the EOQ Formula?
n) Your CEO just announced that inventory levels must be cut by 10% in order to reduce costs (based on your original EOQ in a.). What would your new Q need to be?		units	(note: average inventory = Q/2 )
o) Based on your new Q from above, you will actually raising costs unless you can change S too. What would your new S need to be in order to stay with an optimal ordering policy?
p) How much must S be reduced from the current cost-per order to reach your new goal?
q) List 3 specific ways in which you can lower S in order to reach your goal?	1)
	2)
	3)
	Q	Annual Holding Cost	Annual Ordering Cost	Total Cost
	50
	75
	100
	125
	150
	175
	200
	225
	250
	275
	300
	325
	350
	375
	400
	425
	450
	475
	500
	525
	550
	575
	600
	625
	650
	675
	700
	725
	750
	775
	800
	825
	850
	875
	900