Question

Part II:InventoryManagement In the following, you need to manage the stock level of the company with respect to some costs that your team already estimated. The team report states that for one order made, the company should pay 20 AED as clerical costs and 30 AED as packing costs. It is stated also that the company spends 10 AED to produce one mask and that 80% of that corresponds to the cost of keeping one mask in stock for one year. With this information at hand you will manage to meet the annual demand for year 2021 and which corresponds to the demand forecast for period 15 (with the most accurate method in part I)

1- If the order quantity is 20% of the annual demand,Determine the ordering, holding, and total inventory costs for that order quantity.

2- If the order quantity is 50% of the annual demand,Determine the ordering, holding, and total inventory costs for that order quantity.

3- Can you tell if the order quantity, used in the previous question, is the optimal order quantity or not (that minimize the total inventory cost)? Explain why.

4- Using the EOQ model, Determine the optimal order quantity.

5- How many orders will be placed per year using the optimal order quantity.

6- Determine the ordering, holding, and total inventory costs for the optimal order quantity.

Part III:

Capacity Design Pharma.Tech is planning to expand its production capacity, to meet the growing demands of 2021 and later, by opening a new plant to produce its high selling products (the medical face masks) by using mass production processes for the mass market. The manufacturing team is discussing the potential layout options for the new factory. As the advisor for the company, answer the following questions.

1. Which layout type is most suitable for the new factory? Justify your choice.

2. Discuss the advantages and disadvantages of your proposed layoutcompared to another alternative layout type in terms of demand volume, flexibility, labor skill, and equipment requirement.

period	year	demand
1	2007	7851
2	2008	3462
3	2009	3928
4	2010	8401
5	2011	4250
6	2012	2629
7	2013	8629
8	2014	4946
9	2015	2136
10	2016	7065
11	2017	8081
12	2018	3206
13	2019	6471
14	2020	86290

Answer 1

Part II :

Solution :

Demand,D=30718.98

Ordering cost,Co=20+30=50

Unit cost of mask,Cu=10

Holding cost percentage i=80%=0.8

(1)

If the order quantity is 20% of the annual demand ie 20% of 30718.98=6143.8

Then no: of orders=D/Ordering quantity=30718.98/6143.8=4.999=5 orders

Ordering cost=No: of orders*ordering cost per order

Ordering cost=5*50=250

Holding cost=(Average inventory/2)*i*Cu=(6143.8/2)*0.8*10=24575.2

Purchase cost=30718.98*10=307189.8

Total Inventory cost=Ordering cost+Holding cost+Purchase cost=250+24575.2+307189.8=332015

(2)

If the order quantity is 50% of the annual demand ie 50% of 30718.98=15359.49

Then no: of orders=D/Ordering quantity=30718.98/15359.49=2 orders

Ordering cost=No: of orders*ordering cost per order

Ordering cost=2*50=100

Holding cost=(Average inventory/2)*i*Cu=(15359.49/2)*0.8*10=61437.96

Purchase cost=30718.98*10=307189.8

Total Inventory cost=Ordering cost+Holding cost+Purchase cost=100+61437.96+307189.8=368727.76

(3)

Optimal Order Quantity,EOQ=

EOQ==619.66

For optimal quantity ,ordering costs and holding will be almost same. and also EOQ is 619.66,the order quantity used in question 2 is not the optimal order quantity

(4)

Optimal Order Quantity,EOQ=

EOQ==619.66

(5)

Annual Demand=30718.98

Optimal ordering quantity=619.66

No of orders with optimal ordering quantity is Annual Demand /Ordering quantity=30718.98/619.66=49.57 orders

(6)

If the order quantity is optimal order quanity which is 619.66

Then no: of orders=D/Ordering quantity=30718.98/619.66=49.57 orders

Ordering cost=No: of orders*ordering cost per order

Ordering cost=49.57*50=2478.5

Holding cost=(Average inventory/2)*i*Cu=(619.66/2)*0.8*10=2478.64

Purchase cost=30718.98*10=307189.8

Total Inventory cost=Ordering cost+Holding cost+Purchase cost=2478.5+2478.64+307189.8=312146.94

There are more than 1 questions, as per the Q&A guidelines we are allowed to do only one question. If you want to get the answers for the rest of the parts, please post the question in a new post.

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