MBA731 Week 6 Parts Emporium 
To: Dr.
From:
Subject: Parts Emporium
Date: 22/03/2015
Wholesale distributor, Parts Emporium have experienced on the business growing path challenge from supply chain management side. Company is specialized in the distribution of auto parts and playing key role in that segment as largest and fully independent supplier in north central region of US. To implement optimal solution company have decided to hire Sue McCaskey as Material Manager. First day at work Sue is trying to focus her activity on two products. She believes, that optimizing supply chain for them will convince other team members on the new approach toward distribution of Parts Emporium goods.
EOQ as base for orders
Focusing on two of products, exhaust gaskets and drive belts with EG151 and DB032 symbols respectively McCaskey looking for well known for her solutions. Oppositely to “perfect world” situation she has learned from the study, where all data are available, confirmed and structural way, in Parts Emporium not all info is available immediately. Inventory is out of control, as 60 days of part are on stock but customer service still struggle to deliver on time.
Exhaust Gaskets
Simple way of Economic Order Quantity analyzes for above-mentioned components give already preliminary answer. Gaskets are ordered with 150 pc lot size what generate annual ordering cost of 707$ and holding cost of 139$.Total 846 USD annual inventory cost of the item. Implementing orders policy according to EOQ that the total cost may drop 626 USD, 26% saving only for that one item present interesting alternative.
Drive belts
Drive belts product EOQ analyze present as follow: current total inventory cost is 512 (1000 as lot size) with 27$ ordering cost and 485$holding cost. That total can be cut to 229 USD with 236 pc as lot size, even if ordering cost will grow to 115$, holding cost will drop from 485$ to 114$. 55% saving on drive belts that the option to go for by EOQ implementation.
For Sue McCaskey that two
From:
Subject: Parts Emporium
Date: 22/03/2015
Wholesale distributor, Parts Emporium have experienced on the business growing path challenge from supply chain management side. Company is specialized in the distribution of auto parts and playing key role in that segment as largest and fully independent supplier in north central region of US. To implement optimal solution company have decided to hire Sue McCaskey as Material Manager. First day at work Sue is trying to focus her activity on two products. She believes, that optimizing supply chain for them will convince other team members on the new approach toward distribution of Parts Emporium goods.
EOQ as base for orders
Focusing on two of products, exhaust gaskets and drive belts with EG151 and DB032 symbols respectively McCaskey looking for well known for her solutions. Oppositely to “perfect world” situation she has learned from the study, where all data are available, confirmed and structural way, in Parts Emporium not all info is available immediately. Inventory is out of control, as 60 days of part are on stock but customer service still struggle to deliver on time.
Exhaust Gaskets
Simple way of Economic Order Quantity analyzes for above-mentioned components give already preliminary answer. Gaskets are ordered with 150 pc lot size what generate annual ordering cost of 707$ and holding cost of 139$.Total 846 USD annual inventory cost of the item. Implementing orders policy according to EOQ that the total cost may drop 626 USD, 26% saving only for that one item present interesting alternative.
Drive belts
Drive belts product EOQ analyze present as follow: current total inventory cost is 512 (1000 as lot size) with 27$ ordering cost and 485$holding cost. That total can be cut to 229 USD with 236 pc as lot size, even if ordering cost will grow to 115$, holding cost will drop from 485$ to 114$. 55% saving on drive belts that the option to go for by EOQ implementation.
For Sue McCaskey that two