03 Feb Inventory management and lean operations are a large part of making operations work. ASC Machine Shop uses 2,500 brackets over the course of a year. These
nventory management and lean operations are a large part of making operations work.
ASC Machine Shop uses 2,500 brackets over the course of a year. These brackets are purchased from their supplier, Best Brackets, located 90 miles away. The following information is known about the brackets:
- Annual demand: 2,500
- Holding cost—per bracket, per year: $1.50
- Order cost, per order: $18.75
- Lead time: 2 Days
- Working days per year: 250
Note: This is a corporate operation, and there are 250 working days per year.
Download this Unit 4 IP Template for Option 2.
Using what you have learned, use the template to calculate your answers, and then respond to the following questions:
- Given the information, what is the economic order quantity (EOQ)?
- Once you have the EOQ determined, provide the average inventory. What is the annual inventory holding cost based on this information?
- Knowing the EOQ, how many orders are made each year? What is the annual order cost based off this information?
- Now that you know the EOQ, what is the total annual cost of inventory?
- What is the time between orders?
- Why are the EOQ and ROP important for operations and planning? Provide at least 2 examples.
Once you have completed your table, write a 1–2-page paper that addresses the reasoning for your responses. Be sure to submit your IP Unit 4 template for this assignment as well as the Word document.
Sheet1
| Annual demand | 2,500 | |
| Holding cost—per bracket, per year | $1.50 | |
| Order cost, per order | $18.75 | |
| Lead time | 2 Days | |
| Working days per year | 250 | |
| 1 | Economic order quantity | |
| 2 | Average inventory | |
| Annual holding cost | ||
| 3 | Orders per year | |
| Annual order cost | ||
| 4 | Total cost of inventory | |
| 5 | Time between orders | |
