Parts Emporium Case

Topics: Costs, Inventory / Pages: 2 (260 words) / Published: Nov 22nd, 2012
Case 3
MBA_731
John Burkhart
11/21/12

Parts Emporium

DB032: Drive Belt

1. Total costs for EG151; include ordering costs and holding costs. Compare this to the current system costs. You do no need to include the cost of safety stock for this comparison.

Actual cost for this part: \$4.16
Ordering Cost: \$20.00
Holding cost: 20% of inventory investment
Units on hand: 0
Units on back order: 11
Units scheduled receipt: 150
Total Cost: \$624 + \$20 + \$125 = \$769

2. Total costs for the DB032; include ordering costs and holding costs. Compare this to the current system. You do not need to include the cost of safety stock for this comparison.

Actual cost for this part: \$4.27
Ordering Cost: \$10.00
Holding cost: 20% of inventory investment
Units on hand: 324
Total Cost: \$1,383.50 + \$10 + \$277 = \$1670.50

3. Proposed system for EG151; determine both Q and R.

2.86 x 52 = 149

4. Proposed system for DB032; determine both Q and R.

1.76 x 52 = 92

5. For EG151 proposed system, calculate the cost of both safety stock and stock outs. Calculate the cost of stock outs for the current system. Does the safety stock pay off?

6. For BD032 proposed system, calculate the cost of both safety stock and stock outs. Calculate the cost of stock outs for the current system. Does the safety stock pay off?

Resources:

Krajewski, L., Ritzman, L., & Malhotra, M. (2010). Operations management process and supply chains. (10th ed.). New Jersey: Prentice