Question

ICON Motors has the following demand to meet for custom manufactured parts.

The holding cost for that item is $1 per week and each setup costs $500.

Lead time is 2 weeks.

Calculate the planned order releases using: the POQ techniques.

POQ technique

POQ Interval =

Answer

Month		1	2	3	4	5	6	7	8
Gross requirements		0	200	250	0	300	100	200
Projected on hand	300	Answer	Answer	Answer	Answer	Answer	Answer	Answer
Net Requirement		Answer	Answer	Answer	Answer	Answer	Answer	Answer
Planned Receipt		Answer	Answer	Answer	Answer	Answer	Answer	Answer
Planned Order		Answer	Answer	Answer	Answer	Answer	Answer	Answer

Set Up cost	Answer
Holding Cost	Answer
Total	Answer

Please answer all parts of the question.

Answer 1

Average weekly demand (after subtracting initial inventory), D  = (0+200+250+0+300+100+200-300)/7

= 107

(in the table, time unit is month, lead time and holding cost is in weeks. So, assuming time unit is weeks for all purposes)

Setup cost, S = $ 500

Holding cost, H = $ 1 per unit per week

EOQ = sqrt(2DS/H)

= sqrt(2*107*500/1)

= 327

POQ interval = Q/D

= 327/107

= 3 weeks  (rounded-off)

Using POQ policy, order is released at an interval of 3 weeks and order quantity is equal to the net requirement of 3 weeks

Resulting MRP is following:

Set up cost = Number of planned order * S = 2*500 = $ 1,000

Holding cost = SUM of projected on hand * H = (300+100+300+300+0+200+0)*1 = $ 1,200

Total cost = 1000+1200 = $ 2,200