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  • Group 2 - Group Assignment 2 - Parts Emporium

    Diunggah oleh

    Mehmet Kemal Ucuzcu
    6K tayangan8 halaman
    Introducing an inventory management system reduced total annual inventory costs by 34% or $495k. Key cost reductions included a $309k decrease in ordering costs and $287k reduction in average annual cycle inventory levels. While EG151 saw a $394k ordering cost decrease and $387 reduction in inventory levels, DB032 benefited from $85k lower ordering costs and $101 lower average inventory. The analysis showed inventory management optimized order quantities, reduced safety stock needs, and lowered total annual holding and ordering expenses.

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    Introducing an inventory management system reduced total annual inventory costs by 34% or $495k. Key cost reductions included a $309k decrease in ordering costs and $287k reduction in average annual cycle inventory levels. While EG151 saw a $394k ordering cost decrease and $387 reduction in inventory levels, DB032 benefited from $85k lower ordering costs and $101 lower average inventory. The analysis showed inventory management optimized order quantities, reduced safety stock needs, and lowered total annual holding and ordering expenses.

    Hak Cipta:

    Attribution Non-Commercial (BY-NC)
    Unduh sebagai XLSX, PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    6K tayangan8 halaman

    Group 2 - Group Assignment 2 - Parts Emporium

    Diunggah oleh

    Mehmet Kemal Ucuzcu
    Introducing an inventory management system reduced total annual inventory costs by 34% or $495k. Key cost reductions included a $309k decrease in ordering costs and $287k reduction in average annual cycle inventory levels. While EG151 saw a $394k ordering cost decrease and $387 reduction in inventory levels, DB032 benefited from $85k lower ordering costs and $101 lower average inventory. The analysis showed inventory management optimized order quantities, reduced safety stock needs, and lowered total annual holding and ordering expenses.

    Hak Cipta:

    Attribution Non-Commercial (BY-NC)
    Unduh sebagai XLSX, PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    dari 8

    Cost after introducing an inventory management system

    EG151
    Demand for the first 21 weeks WEEK DEMAND WEEK 1 104 2 103 3 107 4 105 5 102 6 102 7 101 8 104 9 100 10 100 11 103 Actual total demand in the first 21 weeks Projected total demand for 1 year -> D= 5304 cost of ordering one lot (in $ per lot): S cost of holding one unit in inventory for a year: H 1.85 Q*= optimal quantity to order =(
    2 )

    12 13 14 15 16 17 18 19 20 21

    DEMAND 97 99 102 99 103 101 101 104 108 97

    2142

    5304

    20 Assumption: the mentioned inventory cost (21%) is per year -> 12.99$*(1-0,32(percentage of the gross margin))*0,21 (cost of inventory)

    338

    numbers of orders placed annually:N -> Annual Ordering Cost: D/Q*(S) Average cycle inventory level: Q*/2

    15.68

    313.67

    169

    ->Annual Holding Cost: Q*/2 (H) Safety Stock (SS): for a service level of 95%: z Standard deviation: Lead time: L (in days) = *()

    313.67

    1.645 2.86356421 14 17.63

    -> Annual Holding Cost for Safety Stock: SS(H) Reorder point: R (R= d*L + SS; d=daily demand -> D/365) Total Annual Cost for inventory with an inventory system: C C= D/Q* (S)+ Q*/2 (H) + SS(H)

    32.69 221.07

    660.03

    Costs without introducing an inventory system

    EG151
    Annual Ordering Cost: D/Lot Size*(S) (lot size: 150 according to the case) Average cycle inventory level: Q*/2.2 707.20

    Assumption: we took 2.2 instead of 2, because we are running out of stock and thats why our average cycle inventory level must be 68 lower than 75; our denominator must be higher than 2 126.48

    Annual Holding Cost: Q*/2.2 (H)

    Assumption: Other costs due to a bad inventory system: costs of backorder (=loss of profit) Projected number of backorders at the end of the year Projected costs of backorder at the end of the year Total Annual Cost for inventory without an inventory system: C 11 parts after 21 weeks > 27,24 parts after 52 27.24 weeks

    113.22 =27,24*12,99*32%

    -> the lost margin is our cost for backorders

    946.90

    Summery
    Total Inventory Costs

    EG151
    Total Annual Cost for inventory without an inventory system: Total Annual Cost for inventory with an inventory system: Cost reduction: Cost reduction in %: Annual Cycle Inventory 946.90

    DB032
    509.98

    Total
    1456.87

    660.03 286.87 30.30%

    301.78 208.19 40.82%

    961.81 495.06 33.98%

    EG151
    Without an Inventory System: With an Inventory System: Change in Annual Cycle Inventory (favorable= ""): 68

    DB032
    500

    Total
    568

    169

    113

    282

    101

    -387

    -287

    Ordering Costs

    EG151
    Without an Inventory System: With an Inventory System: Change in Ordering Costs (favorable= "-"): 707.20

    DB032
    24.58

    Total
    732

    313.67

    109.23

    423

    -393.53

    84.65

    -308.88

    DB032
    Demand from 11-21 week WEEK 11 18 12 33 13 53 14 54 15 51 16 53 17 50 18 53 19 54 20 49 21 52 Actual total demand in week 11-21 Projected total demand for 1 year -> D= 2458 cost of ordering one lot (in $ per lot): S cost of holding one unit in inventory for a year: H

    520

    2458

    10 -> 8.89$*(1-0,48(percentage of Assumption: the mentioned inventory cost the gross margin))*0,21(cost of 0.97 inventory) (21%) is per year

    Q*= optimal quantity to order =(


    2 )

    225

    numbers of orders placed annually:N -> Annual Ordering Cost: D/Q*(S) Average cycle inventory level: Q*/2

    10.92

    109.23

    113

    ->Annual Holding Cost: Q*/2 (H) Safety Stock (SS): for a service level of 95%: z Standard deviation: Lead time: L (in days) = *()

    109.23

    1.645 11.3849981 21 85.82

    -> Annual Holding Cost for Safety Stock: SS(H) Reorder point: R (R= d*L + SS; d=daily demand -> D/365) Total Annual Cost for inventory with an inventory system: C C= D/Q* (S)+ Q*/2 (H) + SS(H)

    83.32 227.25

    301.78

    DB032
    Annual Ordering Cost: D/Lot Size*(S) (lot size: 1000 according to the case) Average cycle inventory level: Q*/2 500 Projected Annual Holding Cost: Q*/2 (H) 485.39 ->Lot size (1000)/2 * H 24.58

    Assumption: DB032 won't run out of stock, because Parts Emporium is able to order DB032 in time

    Total Annual Cost for inventory without an inventory system: C

    509.98

    Total Inventory Costs

    EG151
    Without an inventory system: With an inventory system: Cost reduction: Cost reduction in %: 946.90

    DB032
    509.98

    Total
    1456.87

    660.03 286.87 30.30%

    301.78 208.19 40.82%

    961.81 495.06 33.98%

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