Medical Laser Equipment Essay

1178 Words May 29th, 2012 5 Pages
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 Average Inventory = 5 Units Order Cost = $95 Stock out Cost = $250 Holding Cost = 50% * $1,000 = $500 Capital Cost = 10% Handling Cost = 15% Obsolescence = 5% Storage Cost = 20%
We started the case analysis by the normality test for the current data to check if the data is normally distributed or not. Our objective is to calculate the current Total Cost and then come up with a better solution to lower the cost.
As a result, we have developed two scenarios, both of them reveled
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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 ) ̅* C_H)=(95*21)+(8*500) =1,995+4,000 =$5,995
Above total

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