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    Name: Đào Ngọc Thùy Linh ID: IELSIU19187 Class: Thursday Afternoon

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    Nguyễn Quỳnh
    This document contains a homework assignment for an inventory management class. It includes 6 problems analyzing inventory models involving quantity discounts, backorders, reorder points, economic order quantities, and periodic review systems. The student provides explanations and calculations for each problem, determining optimal order quantities, reorder points, costs, and order frequencies given various demand rates, costs, discount structures, and other parameters.

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    Name: Đào Ngọc Thùy Linh ID: IELSIU19187 Class: Thursday Afternoon

    Uploaded by

    Nguyễn Quỳnh
    700 views6 pages
    This document contains a homework assignment for an inventory management class. It includes 6 problems analyzing inventory models involving quantity discounts, backorders, reorder points, economic order quantities, and periodic review systems. The student provides explanations and calculations for each problem, determining optimal order quantities, reorder points, costs, and order frequencies given various demand rates, costs, discount structures, and other parameters.

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    Đào-Ngọc-Thùy-Linh_IELSIU19187_HW2_Invent_Thurs

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    This document contains a homework assignment for an inventory management class. It includes 6 problems analyzing inventory models involving quantity discounts, backorders, reorder points, economic order quantities, and periodic review systems. The student provides explanations and calculations for each problem, determining optimal order quantities, reorder points, costs, and order frequencies given various demand rates, costs, discount structures, and other parameters.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    700 views6 pages

    Name: Đào Ngọc Thùy Linh ID: IELSIU19187 Class: Thursday Afternoon

    Uploaded by

    Nguyễn Quỳnh
    This document contains a homework assignment for an inventory management class. It includes 6 problems analyzing inventory models involving quantity discounts, backorders, reorder points, economic order quantities, and periodic review systems. The student provides explanations and calculations for each problem, determining optimal order quantities, reorder points, costs, and order frequencies given various demand rates, costs, discount structures, and other parameters.

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    of 6

    School of Industrial Engineering & Management (IEM) Inventory Management

    International University, VNU-HCM Instructor: Dr. Nguyen Van Hop

    Homework 2_Chapter 2 (continued)


    Deadline: Class Day next week

    Name: Đào Ngọc Thùy Linh


    ID: IELSIU19187
    Class: Thursday Afternoon

    I. Problem statement:

    1. Quantity discount model:


    - Assumption: Demand is constant, suppliers give quantity discount policy.
    - Decision variable: Optimal order quantity Q given demand rate, associated cost
    (ordering, holding, unit cost,..), discount policy
    - Method: Cost minimization (exact analysis)
    2. Backorder model:
    - Assumption: When demand is unsatisfied, customers place order and wait
    (backordering), EOQ assumptions are in place
    - Decision variable: Optimal ordering size Q* and optimal backorder level S* given as
    EOQ model adding shortage cost per unit per year �� and shortage administration cost
    per unit ��
    - Method: Cost minimization (exact analysis)

    1
    II. Homework:

    Problem 1: Input data of AAC in excel for the case of discount


    Definition Parameter Value Unit
    Ordering cost (20 minutes to check labor cost $12/hour) C0 12 $/order
    Production cost/ Price C 10 $/item
    Holding cost rate (10% of annual interest+ 4%
    miscellaneous) H 14% $/$/year
    Holding cost Ch 1.4 $/unit/year
    Average demand D 6240 items/year
    Assume that the supplier offers for orders having the quantity from the levels of 500 units,
    the discount price will be to the levels of 0.5 USD. Observe the results and explain.

    Explain & Comment: According to the Total Cost, AAC should choose the optimal quantity
    327 units. But if AAC have more budget, they should choose the option 2 with the quantity
    500 units because the cost per unit is lower than that of option 1. (5249.55/500=10.5 <
    3746.74/327=11.5)

    Problem 2: Input data of SCANLON in excel and change the lead time to be longer, observe
    the results and explain
     Lead time 4 weeks

     Lead Time 6 weeks

     Lead Time 8 weeks

    2
    Explain & Comment: Changing Lead Time does not impact on the Order Quantity,
    Backoder, Cycle Time, Number of orders, TV, TC.
    It impacts on Reorder Point, Lead Time increases, ROP increases.

    Problem3: A manufacturing firm located in Calgary produces an item in a 3-month time


    supply. An analyst, attempting to introduce a more logical approach to selecting run
    quantities, has obtained the following estimates of the characteristics of the item: Demand
    rate at 4,000 units/year (assumed constant), fixed ordering cost is $5, unit variable cost is
    $4 per 100 units, carrying rate is at 0.25 $/unit/year
    Note: Assume that the production rate is much larger than D.
    D = 4,000 units/year
    Co = $5
    Price = $4/100 units
    Ch = 0.25*4/100 = $0.01/unit/year
    a/ What is the optimal order quantity?
    2∗�∗�� 2∗4000∗5
    Q* = �ℎ
    = 0.01
    = 2000 �����

    b/ What is the time between consecutive replenishments of the item when the EOQ is used?
    �∗ 2000
    Cycle time T = � = 4000 = 0.5 ���� = 26 ����� = 6 months
    Number of orders per year is 4,000/2,000 = 2 orders

    c/ The production manager insists that the fixed ordering cost A ($5) figure is only a guess.
    Therefore, he insists on using his simple 3-month supply rule. Indicate how you would find
    the range of A values for which the optimal order quantity EOQ (based on A = $5) would be
    preferable (in terms of a lower total of replenishment and carrying costs) to the 3-month
    supply?

    Using 3-month supply rule => Q = 4,000/4 = 1,000 units


    Cycle time T = 3 months; N = 4 times
    TV cost of EOQ = 2000*0.01/2+4000*Co/2000
    TV of 3-month supply rule = 1,000*0.01/2+4,000*Co/1,000
    Equating the TV of EOQ and 3-month supply rule:
    2000*0.01/2+4000*Co/2000 = 1,000*0.01/2+4,000*Co/1,000
    10 + 2Co = 5 + 4Co
    => Co = 2.5$ (the range ordering cost values is preferable)

    Problem 4: The famous Ernie of “Sesame Street” continually faces replenishment decisions
    concerning his cookies supply. The Cookie Monster devours D the cookies at an average
    rate of 200 per day. The P cookies cost $0.03 each. Ernie is getting fed up with having to go

    3
    to the store T once a week. His friend, Bert, has offered to do a study to help Ernie with his
    problem.
    D = 200/day => Q/week=1,400 P = $0.03/unit T = 1 week
    a/ If Ernie is implicitly following an EOQ policy, what can Bert say about the implicit values
    of the two missing parameters?

    Fixed ordering cost is transportation + fuel


    Holding cost is space cost + cost of utilities

    b/ Suppose that the store offered a special of 10,000 cookies for $200. Should Ernie take
    advantage of the offer? Discuss

    10,000 cookies for $200 => $0.02/unit


    The quantity of cookie needs to be bought every week is 1,400 cookies
    Buying 10,000 cookies which covers approximately 7 weeks.
    It depends on Holding cost, Ordering cost and date of items. Cookies can be over the date
    before consuming.

    Problem 5: A supplier offers the following discount structure on purchases of any single item:

    0 < � < 1000 $5.00 per unit


    1000 ≤ � $4.90 per unit
    < 2000
    2000 ≤ � $4.75 per unit
    The discounts apply to all units. For each of the following items treated separately, what is
    the appropriate order quantity to use, assuming a common value of � = 0.30 $/unit/yr?
    Item Demand � (units/ Ordering cost A
    year) ($)
    1 10,000 25
    2 1,000 25
    3 4,000 25
    4 130,000 25

     Item 1: D = 10,000

    4
     Item 2: D = 1,000

     Item 3: D = 4,000 units

     Item 4: D = 130,000 units

    Problem 6: Suppose that the demand for a product is 30 units per month and the items are
    withdrawn at a constant rate. Each item carries a variable cost of $3 per item. The ordering
    cost each time a purchasing order trigger is $20, and the inventory holding cost is $0.30
    $/unit/month. If shortages are allowed but cost $2 per item per month, and $1 for
    backorder administration. The supplier takes 2 weeks for the product to be at the customer
    door.
    Determine how often to make an order and what size it should be?

    5
    T = 0.1883 year = 9.8 weeks => Every 9.8 weeks we make the order with quantity of 67.8
    units.

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