OM Assignment: Three Jays Case Study

Group Details
Name Roll Number Mobile
Jai Prakash Mishra EPGCOM-10-014 9717495307
K Venkata Teja EPGCOM-10-020 9167292888
Nadapana Vasu EPGCOM-10-026 9848996699
Praneeth Ramaswamy EPGCOM-10-036 9959146494
Swapna Borra EPGCOM-10-050 9985057000
Viswa Chaitanya Goddu EPGCOM-10-054 9959090954

Question 1: Using the data in exhibit 4 and the 2012 annual demand, calculate the EOQ and
ROP (Re order Point) quantities for the five SKUs scheduled to be produced in the last week
of June. How do these amounts compare with those calculated in 2011? Compare the increase
in EOQs with the increase in annual demand.
Ans:
Part 1: EOQ and ROP Calculation

Total Set Annual %

Up Cost Demand Carrying Unit Cost EOQ ROP
12 ounce Jar (S)* 2012 Cost (i) ( C )*** (Cases) (Cases)

Strawberry Jam 63.70 3,869 9% 28.34 440 223

Raspberry Jelly 63.70 3,006 9% 30.52 373 173

Peach Jam 63.70 1,970 9% 26.86 322 114

Blueberry Jam 63.70 1,211 9% 29.01 243 70

Apple/Mint Jelly 63.70 832 9% 26.32 212 48

The above calculation is done using the 2012 Annual demand data. However in the question
its been asked to calculate in the last week of June. Hence this needs to be rechecked how
demand in last week of June will be calculated
 Part 2: Demand and EOQ Comparison between 2010 and 2012 data

Annual Annual Demand EOQ

Total Set Up Demand Demand Demand Increase EOQ EOQ EOQ Increase
12 ounce Jar Cost (S)* 2010 2012 Increase % 2010 2012 Diff %

Strawberry Jam 63.70 2,993 3,869 876 29.27% 387 440 53 13.59%

Raspberry Jelly 63.70 2,335 3,006 671 28.74% 329 373 44 13.49%

Peach Jam 63.70 1,492 1,970 478 32.04% 280 322 42 15.08%

Blueberry Jam 63.70 886 1,211 325 36.68% 208 243 35 16.87%

Apple/Mint Jelly 63.70 625 832 207 33.12% 183 212 29 15.59%

The above table describe as demand has been grown with average of 31.97% across all 5
SKUs hence EOQ has been increased by 14.92% average across all 5 SKUs.
Question 2: Brodie is uncertain if the costs presented in Exhibit 2 are appropriate for
determining the EOQs. What changes would you recommend and why? Why should the cost
of the three idle part-time workers be included when the production line is down? Using the
2012 annual demand, and your recommendations, recalculate the EOQs for the five SKUs

Ans 2:
Determine correctness of EOQ is appropriate or not
In the above calculation, set up cost does not include the cost of part time worker and storage
cost. And not considering this into set up cost will represent the less value of set up cost
result into inaccurate calculation of EOQ.
Hence recommendation is to include part time labour cost and storage cost into set up cost
with certain assumptions even if production line is down.
1. The amount spent of salary of 3 part time workers= 3*.5*23.50=35.55
2. Hence New set up cost would be=63.70+35.55=98.95
Now we also need to add storage cost into the carrying cost as it should not be zero.
Assume storage cost would be 2% hence the new carrying cost would be 9% + 2%=11%

By putting these into consideration the new EOQ and ROP look like this.

Total Set Annual %

Up Cost Demand Carrying Unit Cost EOQ ROP
12 ounce Jar (S)* 2012 Cost (i) ( C )*** (Cases) (Cases)

Strawberry Jam 98.55 3,869 11% 28.34 495 223

Raspberry Jelly 98.55 3,006 11% 30.52 420 173

Peach Jam 98.55 1,970 11% 26.86 363 114

Blueberry Jam 98.55 1,211 11% 29.01 273 70

Apple/Mint Jelly 98.55 832 11% 26.32 238 48