An Oximeter manufacturer purchases the displays used in the Oximeter from an overseas supplier. The supplier...

 

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An Oximeter manufacturer purchases the displays used in the Oximeter from an overseas supplier. The supplier charges $12 per display and there is an ordering cost of $100 every time an order is placed to the supplier. The items take 3 weeks to arrive after the order is placed. The company is considering whether to make the displays in-house because of the uncertainties in shipment from overseas. The in-house production process for the displays is continuous, occurs at a finite rate and is non-stop throughout the year. Info as attached X= 9 Table 1: Display Production Process Annual Demand Unit Cost Setup Cost Machine Purchase Cost Holding cost Daily Production Rate Production Set-up time 73,000 units $10 $85 per batch $5000 (13+X) *0.1 percent 1,000 units 15 days (a) Determine the best order quantity the company should order from the supplier to minimise the annual inventory cost. What is the annual inventory cost if the company decides to purchase that quantity from the supplier? How would the company manage its inventory so that they don't run out of stocks? (b) If the company decides to make the displays in- house, solve for the optimal batch size. What is the optimal inventory cost? What is the number of days required to produce a batch of display units? What would be the ROL? State any assumptions made. (c) Based on the annual inventory cost for the above cases, should the company continue purchasing from the supplier or start producing in-house? Give some reasons. An Oximeter manufacturer purchases the displays used in the Oximeter from an overseas supplier. The supplier charges $12 per display and there is an ordering cost of $100 every time an order is placed to the supplier. The items take 3 weeks to arrive after the order is placed. The company is considering whether to make the displays in-house because of the uncertainties in shipment from overseas. The in-house production process for the displays is continuous, occurs at a finite rate and is non-stop throughout the year. Info as attached X= 9 Table 1: Display Production Process Annual Demand Unit Cost Setup Cost Machine Purchase Cost Holding cost Daily Production Rate Production Set-up time 73,000 units $10 $85 per batch $5000 (13+X) *0.1 percent 1,000 units 15 days (a) Determine the best order quantity the company should order from the supplier to minimise the annual inventory cost. What is the annual inventory cost if the company decides to purchase that quantity from the supplier? How would the company manage its inventory so that they don't run out of stocks? (b) If the company decides to make the displays in- house, solve for the optimal batch size. What is the optimal inventory cost? What is the number of days required to produce a batch of display units? What would be the ROL? State any assumptions made. (c) Based on the annual inventory cost for the above cases, should the company continue purchasing from the supplier or start producing in-house? Give some reasons.

Answer rating: 100% (QA)

A EOQ Sq Rt of 2 x Annual demand x Setup costs Handling costs Sq Rt of 2 x 73000 x 85 22 x 01 Sq Rt of 12410000 0022 237505 units is the Optimum Produ... View the full answer