Case 16 Medical Laser Equipment Case Study

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INTRODUCTION

This Paper analyzes the Case 16: Medical Laser Equipment. Some of the given facts are as follows: Order is set to every Monday which means an annual total of 50 orders No. of Periods = 250 Days Annual Demand = 166 Units
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The replenishment is delivered at once. Only one product is involved. Required Service Level fixed at 95% resulting in having Z-value of 1.645. Beginning Inventory is 4 units as given per case data. Average demand as presented in the normality test is 1 unit (rounded up).

Based on the above assumptions EOQ calculated as:
EOQ= √((2*D* C_p)/C_H ) =√((2*166* 95)/500)=7.9=8 Units
To calculate the re-order point, we need to calculate the safety stock:
SS= Z √L*σ_d = 1.645 √2*0.78=1.8=2 Units
⇒ ROP= (Avg DDLT)+ (Safety Stock) =(1*2)+ (2)=4 Units

Having above figures of EOQ of 8 units and ROP of 4 Units resulted in a total number of 21 orders placed and average ending inventory of 8 units (please refer to attached Excel sheet under the tab named as Scenario I). Therefore, total cost of this model is calculated as follows:

q=21 Orders C_P=$95 C_H=$500 ( I ) ̅=8 Units
〖 ⇒ TC=(C〗_P*q)+(( I ) ̅*
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Please refer to attached excel sheet for detailed calculations.

SCENARIO II: MCLAREN’s ORDER MOMENT - MOM
MOM method accumulate requirement for consecutive period into a tentative order when the cumulative part–period reach or exceed specified target. Moreover, it takes in consideration EOQ and the addition of future demand. Therefore, the model assumptions are as follows: EOQ as calculated previously (in scenario I) is 8 units. Average demand as presented in the normality test is 1 unit (rounded up). Beginning Inventory is 4 units as given per case data.

Based on the above assumptions Time Between Orders (TBO) calculated as:
TBO=EOQ/(d )= 8/1=8 Days
⇒ Z is the largest integer value less than TBO which mean 7

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