OPMGT$301$

Problem Set $2$: Inventory Management

For each problem, clearly state your defined variables and equations. Submit only $1$ Word or PDF file. You do not need to submit your Excel file.

$(40$ pts$.)$

Guinevere runs a hardware store and due to increases in customer demand, would like to expand their lumber offerings. Annual demand is expected to be $1600$ boards per year. Guinevere is considering purchasing boards from supplier A or supplier B$.$ All suppliers sell boards for $$1\mathrm{.}80$ each. The annual holding cost for all suppliers is $80\%$ of the unit price. Supplier A has an ordering cost of $$55$ with no minimum order size. Supplier $B$ has an ordering cost of $$35$ but requires an order size of at least $400$ units.

A$.$ Calculate the Economic Order Quantity $($EOQ$)$ of purchasing from each supplier. Given the minimal order requirements of the suppliers, what is the final optimal order quantity per order from each supplier?

B$.$ Which supplier should Guinevere purchase boards from? Please show the calculation of total cost from each supplier.

C$.$ Supplier $C,$ a multinational lumber supplier, is offering to waive the ordering cost $($ordering cost is $$0)$ if Guinevere agrees to shipments of $800$ boards. Show the calculation of total cost from supplier C$.$ Should Guinevere choose supplier C over either supplier A or B$?$