FORMATIVE ASSESSMENT $2$

$[100$ MARKS$]$

Read the insert below and answer the questions that follow

Procter & Gamble $($P&G$)$ is a multinational consumer goods corporation and one of the world's largest and most recognized

companies in its industry. Founded in $1837$ by William Procter and James Gamble, the company has grown to become a

global leader in the production and marketing of a wide range of household and personal care products. P&G is known for

its extensive and diverse portfolio of consumer goods, including beauty and grooming products, health and wellness items,

household care, and baby care products. Some of its well$-$known brands include Pampers, Tide, Gillette, Pantene, Olay,

and Crest. Procter & Gamble is a global consumer goods giant with a rich history, a diverse product range, and a

commitment to innovation and sustainability. Its household brands are fixtures in many homes worldwide, reflecting its

influence and impact on the consumer goods industry.

Jon R Moeller, the CEO of Procter and Gamble $($P&G$)$ has requested your services in responding to some of the strategic

issues facing the operations management function of the organisation. He has provided you with a number of scenarios that

the organisation has been exposed to and thus requests that you draft a report providing the best response in dealing with

each scenario.

One of the regional offices of P&G$,$ located in Malawi, assembles, and sells premium

diapers $($pampers brand$).$ The supplies for the product are procured from various

manufacturers worldwide. Most of the components are procured from wholesalers in

Southern Africa, some critical items, such as wool, come directly from their manufacturer

based in Asia. For instance, the wool is shipped directly from Asia using agents who

submits an order release once every $4$ weeks. P&G$$s annual requirements total $500$ units

$(2$ per working day$),$ and P&Gs per unit cost is R$1,500.$ The suppliers always promise

delivery within $1$ week following receipt of an order release, there has never been any

experiences of material shortages $($lead time amounts to $5$ working days.$)$

The CFO has been informed that the costs related to inventory include the purchase cost,

which amount to R$500$ per order, also included are the actual labor costs involved in

ordering, customs inspection, arranging for airport pickup, and delivery to the plant,

maintaining inventory records. The costs of holding of storage, damage, insurance, taxes,

and so forth categorised as holding costs are determined on a square$-$metre basis. These

equal R$150$ per unit per year. With added emphasis being placed on efficiencies in the

supply chain, P&G$$s CEO has asked you to evaluate costs associated to inventory control

of wool as it presents opportunities of improved cost savings. Advise on the ideal number

of units of wool that should be ordered to minimise costs, in addition comment on the ROP

for wool given the information provided. Lastly, indicate the downside of depending on the

EOQ model for an organisation such as P&G$.$

$($Make use of relevant calculations and examples when answering questions.$)$