Chapter 6 Inventory Controls

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Chapter 6 Inventory Controls

• Example 1
• Paul Peterson is the inventory manager for Office
  Supplies, Inc., a large office supply warehouse.
  The annual demand for paper punches is 20,000
  units. The ordering cost is 100 per order, and
  the carrying cost is 5 per unit per year. What
  is the economic order quantity? How many orders
  should he place? What is the total cost?

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ISAT 645 / CMPS 591

• Example 2
• Paul Peterson is considering manufacturing
  hole-punch devices. The annual demand is 20,000
  units. The setup cost is 100 per order, and the
  carrying cost is 5 per unit per year. The demand
  rate is 100 units per day and the production rate
  is 150 units per day. What is the most economic
  production size? How long does each production
  run last? How many production runs should have in
  one year?

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• Example 3
• Paul Peterson has found a supplier of hole
  punches that offers quantity discounts. The
  annual demand is 20,000 units, the ordering cost
  is 100 per order, and the carrying cost is 0.5
  of the unit price. For quantities that vary from
  0 to 1,999, the unit price is 10. The price is
  9.98 for quantities that vary from 2,000 to
  3,999 units and 9.96 for quantities that vary
  from 4,000 to 10,000 units. Should he take the
  quantity discount?

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• Example 4
• Steve Handel has observed the following demand
  over the lead time for a product

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Example 4 -- Contd

• The carrying cost is 30 per unit per year., and
  the stockout cost is 50 per unit per stockout.
  Two orders are placed per year. Given this
  information, Steve would like to determine the
  best safety stock policy.

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Example 5

• The Hinsdale Company carries an inventory that
  has a normally distributed demand during the
  reorder period. The mean demand is 350 units and
  the standard deviation is 10. Hinsdale wants to
  follow a policy that results stockouts occurring
  only 2 of the time. How much safety stock should
  be maintained?

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Example 6

• Kimberly Caller is in charge of four inventory
  items. The inventory demand and sales price of
  four inventory items. The inventory demand and
  sales price for each item is summarized in the
  following table. Using ABC analysis, how should
  these inventory items be controlled?

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