cheaper because they receive a lower wage rate and they are not paid benefits. A full-time operator can process about 360 orders per week‚ whereas a temporary operator can process about270 orders per week. A full-time operator averages 1.1 defective orders per week‚ and a part time operator incurs about 2.7 defective orders per week. The company wants to limit the defective orders to 200 per week. The cost of staffing a station with $610 per week‚ and the cost of a station with part-time operators is
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Decision Making Models A – A1. Economic Order Quantity Model (EOQ) The Economic Order Quantity Model will allow an organization to determine the optimal volume of inventory to order at a given time. The EOQ model provides the most optimized approach to inventory ordering as it considers‚ demand‚ ordering cost‚ and holding costs; to develop the volume of inventory to be ordered to maintain to minimum annual cost (Render‚ 2012). Equation: Variables: Q* = optimal number to order D = annual demand in units
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EXERCISE 15.31 Customer response time 1 Date March April Days taken Action 10 LO’s order received by sales department 0 0 14 Order forwarded to manufacturing department 4 4 28 Fabric received from supplier 14 18 8 26 5 Manufacturing commenced 16 Manufacturing completed and order sent to warehouse 30 Order delivered to customer 11 14 Total customer response time 2 3 Cumulative days Order receipt time (days) Waiting time Production time Production cycle time Delivery time Total
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Demand and supply may not be constant over time Inventory can be used to buffer the variability Lower prices may be available for larger orders Extra costs associated with holding more inventory must be balanced against lower purchase price Stockouts may result in lost sales Dissatisfied customers may choose to buy from another supplier 7 Quantity discounts Avoiding stockouts and shortages Inventory Decisions Two fundamental decisions in
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and Component of Inventory Management * It involves the control of the assets that are produced to be solid in the normal course of the firm’s operations. * Primarily involve questions of how much inventory should be ordered and when the order should be placed. * Accumulated either by purchase or production. * In a particularly period‚ Inventory costs are assigned too expense for the portion sold‚ and to assets for the portion not solid. * Generally‚ classified according to
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cost of capital and estimate the cost of placing an order. Assume that the annual inventory cost of a unit is given by‚ CH = iCI‚ where i is the cost of capital and CI‚ the unit cost of the item. 2. Consider the connector data and the all unit price structure described in Table 1. For each price level ($5.00‚ $4.75‚ etc.) determine the EOQ‚ and the corresponding total annual cost. Sketch the total annual cost as a function of the order quantity. Based on these results‚ identify the optimal ordering
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reordering systems that can be used in inventory control? Answer: There are several types of reordering systems‚ in this module we discussed three. The fixed order quantity uses fixed quantities of goods ordered at various order points to replenish inventory. The fixed order period use fixed times of reorder with various order quantities to replenish
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after day 60. Management’s main concern is managing the capacity of the lab in response to the complex demand pattern predicted. Delays resulting from insufficient capacity would undermine LL’s promised lead times and ultimately force LL turn away orders. * Based on an assignment written by Sunil Kumar and Samuel C. Wood‚ Stanford University Graduate School of Business. Copyright 2009. No part of this document may be reproduced without permission from Responsive Learning Technologies‚ Inc. info@responsive
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Lead time‚ the time between placement and receipt of the order‚ is known and consistent. 3. Receipt of inventory is instantaneous and complete‚ the inventory order arrives in one batch at one time. 4. Quantity discounts are nor possible. 5. The only variable costs are the set-up and holding costs. 6. Stockouts can be completely avoided if orders are placed at the right times. 6. What is the relationship of the economic order quantity to demand? To the holding cost? To the set-up costs? The
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1. What is the economic order quantity for standard 5-inch winches if they are ordered from (a) Supplier A‚ and (b) Supplier B? Round your answers up to the next whole unit‚ because Narragansett cannot order a fraction of a winch. EOQ = square root of ( 2 x R x A) V x W R = annual demand is 1500 units A = ordering cost is $1‚000 for Supplier A and $500 for Supplier B V = cost per unit is $300 W = carrying cost percentage is 23%
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