CHAPTER 12 TECHNICAL CASE #12

QUESTION

There are several mathematical models in Chapter 12 - but I want to ensure that you know the BASICS and the ones used most often! Therefore, for this week (be sure to show all your work and calculations - just giving an answer won't suffice!):

Dr. Detroit, a small tech shop, sells widgets. Dr. Detroit sells out these widgets regularly and the demand (D) is 8,000 per year. To re-order, Dr. Detroit spends $45 per order (S) and to keep these widgets in inventory, he spends $2 per unit per year (H).

Calculate the Economic Order Quantity (EOQ) for widgets.

What happens when the holding costs (H) double?

What happens when the holding costs (H) are sliced in half?

For one (1) extra credit point:

Because these widgets sell quickly, Dr. Detroit wants to know when he should reorder. His tech shop is open 250 days per year (he does take time off for vacation and holidays!) and it takes 20 days from the time the order is placed until it is received.

Calculate the Reorder Point (ROP) for the widgets.

Knowing that the widgets are coming from Japan, there is often a delay, so Dr. Detroit wants to keep a safety stock of five (5) days on hand - so knowing that, what is his ROP now?