You are a supply chain manager at XYZ Company, tasked with optimizing the inventory management system....

  

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You are a supply chain manager at XYZ Company, tasked with optimizing the inventory management system. The company has 12 items in its inventory. The following table gives the item number, cost, and annual demand for each item. The holding cost for each item is 20% of its cost and the ordering cost of each item is $25 per order. Help the company by doing the following: 1. Perform an ABC analysis and categorize the items into A, B, and C categories. 2. Find the economic order quantity of each item. Do these ordering quantities vary a lot from item to item? What would you say about the variation if any? 3. Find the total annual cost of holding and ordering (holding cost + ordering cost) for each item. Is there a relationship between the category of an item and the total cost? 4. The company wants to achieve a 99% service level. The lead times (in weeks) for each item and the weekly standard deviations of demand are given in the following table. The company operates 50 weeks a year. 4. Find the reorder point and safety stock for each item. 5. What is the cost of carrying the safety stock for each item? Which category of items has the highest safety stock? Based on your observation can you conclude that the category here will always have the highest safety stock irrespective of this case? Item Cost ($) Annual Demand Weekly Std dev of demand Lead time (in weeks) 1 10 60000 120 5 2345 20 36000 115 42 180000 504 53 5 3 30 18000 54 3 5 51 192000 652 6 6780 12 48000 86 4 18 24000 67 7 43 144000 460 3 9 35 30000 96 7 10 28 42000 67 4 11 14 54000 140 5 12 17 66000 145 4 Note: You can round your results up to two decimal places. You are a supply chain manager at XYZ Company, tasked with optimizing the inventory management system. The company has 12 items in its inventory. The following table gives the item number, cost, and annual demand for each item. The holding cost for each item is 20% of its cost and the ordering cost of each item is $25 per order. Help the company by doing the following: 1. Perform an ABC analysis and categorize the items into A, B, and C categories. 2. Find the economic order quantity of each item. Do these ordering quantities vary a lot from item to item? What would you say about the variation if any? 3. Find the total annual cost of holding and ordering (holding cost + ordering cost) for each item. Is there a relationship between the category of an item and the total cost? 4. The company wants to achieve a 99% service level. The lead times (in weeks) for each item and the weekly standard deviations of demand are given in the following table. The company operates 50 weeks a year. 4. Find the reorder point and safety stock for each item. 5. What is the cost of carrying the safety stock for each item? Which category of items has the highest safety stock? Based on your observation can you conclude that the category here will always have the highest safety stock irrespective of this case? Item Cost ($) Annual Demand Weekly Std dev of demand Lead time (in weeks) 1 10 60000 120 5 2345 20 36000 115 42 180000 504 53 5 3 30 18000 54 3 5 51 192000 652 6 6780 12 48000 86 4 18 24000 67 7 43 144000 460 3 9 35 30000 96 7 10 28 42000 67 4 11 14 54000 140 5 12 17 66000 145 4 Note: You can round your results up to two decimal places.