Team 3 Hardy Hospital Case Study
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
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