  # Team 3 Hardy Hospital Case Study Topics: A Little Bit, A Little Bit Longer, Time, Investment / Pages: 3 (436 words) / Published: Apr 27th, 2015

1

TEAM 3
Krystal Dickout
Delmar Franks
Vanessa Pena
Michael Piatek

Hardy Hospital Case Study 1. What are good estimates of order cost and inventory holding cost? ( State all assumptions and show all computations.)
○ Order Cost:
■ \$20.00 per hr x 1.5 hr (Average purchase order processing cost)

= \$30.00 (Total purchase order cost)
■ \$30.00/3 (sku per purchase order) =
\$10.00
○ Inventory Holding Cost:
■ \$4.60 (Square foot price) x 36,750 (SQFT of storage space)

= \$169,050 (Total storage space cost)
■ 5 (Workers) x \$32,000 (Salary per year) = \$160,000 (Total salaries per year) x .20 (Benefits and overhead costs) = \$32,000 (Total benefits and overhead cost) \$160,000 + \$32,000 = \$192,000 (Total employee cost)
■ Obsolescence and taxes = \$200,000
■ \$169,050 + \$192,000 + \$200,000 =
\$561,050

2. What is the EOQ and reorder point for Strike Disinfectant given your answer to

Question 1?
○ EOQ:
■ D: 151.19 cases (11.63 gallons/4 (gallons per case) x 52)
■ Co: \$10 Order cost
■ I: 13.52% (\$561,050/4.15 million)
■ C: \$84.20 Cost per case
■ Ch: 11.38 case (84.20 x .1352)

2

■ EOQ = √(2 x 151.19 x 10)/(11.38 case)

√(3023.80/11.38)
√(265.71/1775) =
16.30 cases (65.2 gallons)
○ Reorder point:
■ Demand Rate: 11.63 / 4 = 2.9075 cases
■ D: 2.9075 case per week
■ L: Lead Time 2 weeks
■ 2.9075 x 2 =
5.815 or 6 cases 3. Compute the total order and inventory­holding costs for a Fixed Quantity System

(FQS) and compare to their current order Q's. Can you save money by adopting an FQS? 4. What are your final recommendations? Clearly explain your reasoning.
○ As long as demand is constant it will reduce stock-outs and reduce high stock

level. It will begin to make just-in-time supply.
○ Implement a new information system based on EOQ model and fixed quantity

system for items that notably have a constant weekly demand rate.
○ Our assumption is if 1