New Software Proposed 2000 12 Current 2000 1,500,000 $ 75% savings Demand, D Order cost per lot, $s Unit cost per computer, $C Holding cost per year, h By installing a new software system, the software vendor estimates the cost of each order will be reduced by 75%. The current cost for each order is $5000. EOQ Q Demand is 2000 per month. The annual holding cost is 20% and each unit costs $750. Cycle inventory, 0/2 The new software will cost $100,000. How many years will it take to break even on the investment? Number of orders per year D/Q D*$C $5* D/Q Avg invt * % * $C $ Material cost Ordering cost Holding cost Total supply chain cost Savings $100,000 Investment Savings Invest pay back $ years New Software Proposed 2000 12 Current 2000 1,500,000 $ 75% savings Demand, D Order cost per lot, $s Unit cost per computer, $C Holding cost per year, h By installing a new software system, the software vendor estimates the cost of each order will be reduced by 75%. The current cost for each order is $5000. EOQ Q Demand is 2000 per month. The annual holding cost is 20% and each unit costs $750. Cycle inventory, 0/2 The new software will cost $100,000. How many years will it take to break even on the investment? Number of orders per year D/Q D*$C $5* D/Q Avg invt * % * $C $ Material cost Ordering cost Holding cost Total supply chain cost Savings $100,000 Investment Savings Invest pay back $ years