For this session$$s first application exercise, considering the following context as you address each of the questions and points listed: Home$-$Style Cookies buys flour in $25-$pound bags. The bakery uses $1,215$ bags a year. Ordering cost is $$10$ per order. Annual carrying cost is $$75$ per bag.

Determine the economic order quantity.

What is the average number of bags on hand?

How many orders per year will there be$?$

Compute the total cost of ordering and carrying flour.

If holding costs were to increase by $$9$ per year, how much would that affect the minimum total annual cost?

Because Home$-$Style does not use preservatives in their cookies, shelf life is an issue. Therefore, Home$-$Style runs small batches of cookies in order to meet demand but not have excess inventory. The production team schedules batches of chocolate chip cookies every three days. They adjust the number of cookies per production run in order to meet projected demand. For a standard run of $2,000$ chocolate chip cookies, they use:

$19$ cups all$-$purpose flour

$7$ teaspoons salt

$7$ teaspoons baking powder

$7$ teaspoons baking soda

$17$ sticks unsalted butter, softened

$12$ cups packed dark brown sugar

$13/4$ cup granulated sugar

$14$ large eggs

$14$ teaspoons vanilla extract

$14$ cups semisweet chocolate chips

Which ingredients are the most perishable and would need to be ordered more frequently?

What could the operations manager do to minimize the reorder lead time for these in$-$demand perishable ingredients?

What could Home$-$Style do to ensure all cookies are sold before their $3-$day shelf life expires?

What could Home$-$Style do with cookies after their $3-$day shelf life?

$3.$ The retail shop averages demand of $100$ chocolate chip cookies per day, with a $10$ cookie standard deviation. Based on problem two above, lead time for reorder is $3$ days $(0$ standard deviation$)$ since there is no shipping involved. Management would like to ensure a $90\%$ service level for its customers. Use the Session $3$ template.xlsm $($these templates are from Chapter $12)$ to calculate the reorder point $($ROP$).$

$4.$ How might an operations manager use the data from these exercises to improve Home$-$Style Cookies? What have you learned this week that you can apply to your personal or professional life?