(Solved): The partially completed inventory record for a rotor assembly in the figure below

Question 6 The partially completed inventory record for a rotor assembly in the figure below shows gros requirements, scheduled receipts, lead times and current on-hand inventory. The cost of placing an order is R400 and holding cost is R10 per unit. Lead time is 2 weeks. Determine which one of the following order policies will be the most cost effective: i. FOQ of 150 units; ii. L4L; iii. Pod with P=2. Week 2 345 6 78 65 15 45 40 80 80 80 80 Gross requirement:s Scheduled receipts Projected on hand inventory | 20 Planned receipts Planned order releases

The partially completed inventory record for a rotor assembly in the figure below shows gros requirements, scheduled receipts, lead times and current on-hand inventory. The cost of placing an order is R400 and holding cost is R10 per unit. Lead time is 2 weeks. Determine which one of the following order policies will be the most cost effective: i. FOQ of 150 units: ii. L4L: iii. Pod with P = 2.

Expert Answer

i) FOQ of 150 units

Total cost = Holding cost + Ordering cost = (45+5+75+145+65+135)*10 + 4*400 = 6300

ii) L4L Ordering policy

Total cost = Holding cost + Ordering cost = 0 + 6*400 = 2400

iii) POQ with P = 2 weeks

Total cost = Holding cost + Ordering cost = (40+80+80)*10 + 3*400 = 3200

We see that the total cost is lowest in case of L4L . Therefore L4L policy is the most cost effective.

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