Question

Jill's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tegdiws are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every five weeks. Data for both products are as follows:

ITEM	TEGDIW			WIDGET
Annual demand		14,000			9,000
Holding cost (% of item cost)		20	%		15	%
Setup or order cost	$	110.00		$	15.00
Lead time		6	weeks		2	weeks
Safety stock		40	units		6	units
Item cost	$	5		$	4

a. What is the reorder quantity and reorder point for Tegdiws? (Round your answers to the nearest whole number.)

Optimal reorder quantity			units
Reorder point			units

b. What is the inventory control system for Widgets? (Round your answer to the nearest whole number.)

Inventory control system for Widgets q = − I (Inventory on hand)

Answer 1

Question: Jill's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tegdiws are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every five weeks. Data for both products are as follows:

Answer:

a. What is the reorder quantity and reorder point for Tegdiws?

Given that:

Annual Demand (D) = 14000

Ordering Cost (S) = 110

Item Cost (C) = 5

Holding Cost (H) = 20% x 5 = 1

Now:

The Reorder Quantity (ROQ) is given by:

ROQ = Sqrt(2 x D x S /H)

Therefore:

ROQ = Sqrt(2 x 14000 x 110 / 1)

ROQ = Sqrt(3080000)

ROQ = 1754.99

ROQ = 1755 Units

Reorder Point (ROP) is given by:

ROP = d x Lt + SS

Given that:

Safety Stock (SS) = 40

Lead Time (Lt) = 6

Weekly Demand (d) = 14000 / 52 = 269.230769231 = 269.23

Therefore:

ROP = 269.23 x 6 + 40

ROP = 1655.38

ROP = 1655 Units

b. What is the inventory control system for Widgets?

In this problem, the inventory on hand describes the Fixed Time Period Model. Since on-hand inventory(I) is not given, we assume it to be zero.

Now:

q = d x (T + Lt) + SS - I

Here, wrt. Widget: T = 5; SS = 6; Lt = 2; d = 269.23

Therefore:

q = 269.23 x (5 + 2) + 6 - 0

q = 1891

or

Inventory control system for Widgets (q) = 1891 - I