# Case 3 Inventory Management 2015

Topics: Costs, Marginal cost, Inventory Pages: 2 (379 words) Published: March 24, 2015
﻿Case 3: Managing inventories in a Hospital

The case is about Control versus Cost versus Service versus Liability. What if the hospital stock out of a SKU and hurts a patient or if the patient dies due to lack of inventory? The EOQ is a marginal cost model. – Models are only as good as their parameter estimates –Answer the four case questions with special emphasis on getting good estimates of order and inventory holding costs

Instructions:
Read case at the end of Chapter 12, pages 269 to 271.

Answer the following questions. Hand in your final answers through the drop box on LEA. Make sure to show you calculations and explain your reasoning.

1. What are the good estimates of order cost and inventory-holding cost? State all assumptions and show all your calculations ( 4 points). DEF: P.250

2. What is the EOQ and reorder point for Strike Disinfectant given your answer to question 1 ? ( 3 points)

3. Compute the total costs (order and inventory-holding costs) for a fixed quantity system (FQS) and compare to the current order Q’s (see exhibit 12.16 for order Q). Can you save money by adopting an FQS? ( 3 points)

4. What are your final recommendations, including what you would recommend regarding regular and special orders, the state bidding system, and overall control of the university materials-management system? Explain the reasoning for your recommendations. ( 5 points)

BONUS POINTS (optional)
IF they were to use a Fixed period system, how would the system work ? Compute T and M. Show your calculations. ( 2 points)

This assignment can be done individually or in teams of 2 (maximum)..

Due date: March 13, 2015, end of day.

Ordering Cost: are incurred as a result of the work involved in placing orders with suppliers or configuring tools. Order and setup costs do not depend on the number of items purchased or manufactured, but rather on the number of orders placed.

Inventory-Holding Cost: are...