QUESTIONS
1. Put yourself in Sue McCaskey's position and prepare a detailed report to Dan Block and Ed Spriggs on managing the inventory of the EG151 exhaust gasket and the DB032 drive belt. Be sure to present a proper inventors system and recognize all relevant costs.
2. By how much do your recommendations for these two items reduce annual cycle inventory, stock out, and ordering costs?
Summary
This case portrays the issues confronting Sue McCaskey, the new materials administrator of a wholesale merchant of car parts. She looks for approaches to cut the bloated inventories while enhancing client administration. Delay purchases with intemperate lost deals are very continuous. !inventories were much higher than anticipated when the new office …show more content…
EG151 Exhaust Gasket
New Plan
Start by assessing yearly request and the variability in the interest amid the lead time for this first item. Working with the week after week requests for the initial 21 weeks of this current year and accepting 52 business weeks for each year, we discover the EOQ as follows:
Weekly demand average = 102 gaskets/ week
Annual demand (D) = 102 (52) = 5304 gaskets
Holding Cost= $1.85 per gasket per year (or 0.21 x 0.68 x $12.99)
Ordering Cost = $2- Per Order
EOQ = The Square root of 2(5304) ($20)/ $1.85 = gaskets
Changing to R, the ordinary circulation reference section demonstrates that a 95% cycle-service level compares to a z= 1.65. We then utilize the EG151 information to affectionate the standard deviation of interest
Standard Deviation in weekly demand = 2.86 gaskets
b. Cost Comparison
After developing their plan, students can compare its annual cost with what would be experienced with current policies.
Cost Category Current Plan Proposed Plan
Ordering Cost $707 $313
Holding Cost $139 $314
TOTAL $846 …show more content…
One side effect of such misfortunes is that 11 units are on delay purchase in week 21. A lost deal costs at least $4.16 per gasket (0.32 x $12.99) If 10 percent of yearly deals were lost with the present arrangement, this expense would be $4.16 (0.10) (5304) = $2,206 every year. Such a misfortune would be tremendously diminished with the 95% cycle service executed with the proposed arrangement.
2.DB032 Drive Belt
New Plan
The accompanying interest evaluations depend on weeks 13 through 21. Weeks 11 and 12 are rejected from the investigation in light of the fact that the new item's start-up makes them unrepresentative. We discover the EOQ as follows:
Weekly demand average= 52 Belts/week
Annual demand (D) = 52(52)= 2704 belts
Holding cost $0.97 per belt per year (or 0.21 x 0.52 x $8.89)
Ordering Cost $10 per order
EOQ= Square root of 2(2704)($10)/$0.92 = 236 gaskets
Turning to R, where z remains at 1.65, we use the data in the DB032 table to find
Standard Deviation in weekly demand= 1.76 belts]
b. Cost Comparison
After developing their plan, students again can compare the cost for belts with what would be experienced with currents policies.
Cost Category Current Plan Proposed Plan
Ordering cost $27 $115
Holding cost $458 $114
TOTAL $512
1. Put yourself in Sue McCaskey's position and prepare a detailed report to Dan Block and Ed Spriggs on managing the inventory of the EG151 exhaust gasket and the DB032 drive belt. Be sure to present a proper inventors system and recognize all relevant costs.
2. By how much do your recommendations for these two items reduce annual cycle inventory, stock out, and ordering costs?
Summary
This case portrays the issues confronting Sue McCaskey, the new materials administrator of a wholesale merchant of car parts. She looks for approaches to cut the bloated inventories while enhancing client administration. Delay purchases with intemperate lost deals are very continuous. !inventories were much higher than anticipated when the new office …show more content…
EG151 Exhaust Gasket
New Plan
Start by assessing yearly request and the variability in the interest amid the lead time for this first item. Working with the week after week requests for the initial 21 weeks of this current year and accepting 52 business weeks for each year, we discover the EOQ as follows:
Weekly demand average = 102 gaskets/ week
Annual demand (D) = 102 (52) = 5304 gaskets
Holding Cost= $1.85 per gasket per year (or 0.21 x 0.68 x $12.99)
Ordering Cost = $2- Per Order
EOQ = The Square root of 2(5304) ($20)/ $1.85 = gaskets
Changing to R, the ordinary circulation reference section demonstrates that a 95% cycle-service level compares to a z= 1.65. We then utilize the EG151 information to affectionate the standard deviation of interest
Standard Deviation in weekly demand = 2.86 gaskets
b. Cost Comparison
After developing their plan, students can compare its annual cost with what would be experienced with current policies.
Cost Category Current Plan Proposed Plan
Ordering Cost $707 $313
Holding Cost $139 $314
TOTAL $846 …show more content…
One side effect of such misfortunes is that 11 units are on delay purchase in week 21. A lost deal costs at least $4.16 per gasket (0.32 x $12.99) If 10 percent of yearly deals were lost with the present arrangement, this expense would be $4.16 (0.10) (5304) = $2,206 every year. Such a misfortune would be tremendously diminished with the 95% cycle service executed with the proposed arrangement.
2.DB032 Drive Belt
New Plan
The accompanying interest evaluations depend on weeks 13 through 21. Weeks 11 and 12 are rejected from the investigation in light of the fact that the new item's start-up makes them unrepresentative. We discover the EOQ as follows:
Weekly demand average= 52 Belts/week
Annual demand (D) = 52(52)= 2704 belts
Holding cost $0.97 per belt per year (or 0.21 x 0.52 x $8.89)
Ordering Cost $10 per order
EOQ= Square root of 2(2704)($10)/$0.92 = 236 gaskets
Turning to R, where z remains at 1.65, we use the data in the DB032 table to find
Standard Deviation in weekly demand= 1.76 belts]
b. Cost Comparison
After developing their plan, students again can compare the cost for belts with what would be experienced with currents policies.
Cost Category Current Plan Proposed Plan
Ordering cost $27 $115
Holding cost $458 $114
TOTAL $512