Question

This question will have you calculating 2 different EOQ and ROP values and interpreting the results.For both EOQ and ROP, give your final answer in full sock sets (ROUND UP to the next whole number). The specific questions to answer are based in parts a-c.Tips to solve the EOQ and ROP are given below in bullet points.

1. Calculate EOQ and ROP for FY2020 based on the FY2020 forecast value that you determined to be most accurate in Question #1.
2. Calculate the EOQ and ROP based upon actual demand for FY2020
3. Use the total inventory cost calculation to determine total inventory costs for each of the three EOQ results: EOQ from part a, EOQ from part b, and the Q that Throx is currently using (given in the case) When determining the costs use 2020 actuals for your Demand (D) for all three scenarios.
   1. Compare the total inventory costs from the three results and analyze what it shows you.
   2. What are the implications of the ROP Throx is currently using versus the ROP based on Actual Demand. .

Info

See additional tips below:

• Use a service level of 95% (z=1.65) when calculating the ROP
• For the standard deviation of weekly demand, use the data provided in the table on page 2 of the case with the FY2020 forecast for all approaches.
• Annual Inventory management costs will include the following: Annual Holding Costs, Annual Ordering Costs, and Purchase Cost.
• The total lead time is considered to be 7 weeks from when Throxplaces an order until it reaches the Richmond facility. Historically, the standard deviation of lead time has been 1.5 weeks.

Product Orders (Demand) Information

The company provides you with the following information for the past two fiscal years:

Demand Characteristic	2019	2020
Annual Demand, sets	26,918	31,763
Average Weekly Demand	518	611
Standard Deviation of weekly Demand	130	153

Product Forecasting Information

	Actual Demand (Three Sock Sets)	Weighted Moving Average Fcst	Exponential Forecast
2017	18,850	15,500	16,300
2018	22,432	17,060	18,340
2019	26,918	20,614	21,613
2020	31,763	24,765	25,857

Inventory Management Information

The initial inventory for all sock styles combined at the beginning of FY 2021 is 2,250 units. You also have information on current costs, which includes:

• Order cost to Throxfor an order placed with its current supplier, $/order = S = $275
• Holding cost per set per year = H = $2.25
• The company currently pays (P) $7.25 for each set of socks

The company uses a continuous review replenishment policy, and has IT systems in place that allow constant monitoring of key information. Last year, the company used an ROP under this policy of 2,200 units for all sock styles and an order quantity Q of 5,000 units for all sock styles.