Production Planning and Inventory Control (MGMT617)

Question: Read the case below and find the solution to the given scenarios. ALDO was founded in 2010 to find a solution for sore feet. This organization stood for comfort and the production department is more concerned about ordering decisions and selected criteria. The production manager is interested in finding the relationship between the cost of placing an order, costs of carrying inventory, and the order quantity needed for any specific period. He is also conscious about inventory and order needed to be maintained in such a pandemic situation to avoid any shortage in supply. He takes a few assumptions to make proper planning for production needed. The assumptions include that demand rate is considered constant, holding and ordering costs are only relevant costs. So far the decision for the item is independent of other items' decisions. No uncertainty in lead time or supply is assumed. Similarly, order quantity is assumed to be received on the same day. Production Manager's main focus is to find the lowest-cost ordering quantity so that production, supply, and prices could be managed in the current pandemic situation. The organization also placed an order of colorful rainbow & comfortable shoes of 12000 units quarterly at a price of Rs. 2500 per unit. Its carrying cost is 18% and the order cost is Rs 1500 per order. 1. What would be the most economical order quantity for ALDO? 2. What is the number of orders that are needed to be placed by ALDO? (Marks: 10)