A6: CH 9--INVENTORY-Mohammed Alzahrani https://xlitemprod.pearsoncmg.

com/api/v1/print/om

Instructor: John Bing

Student: Mohammed Alzahrani
Course: BUA 345--Operations & Supply Assignment: A6: CH 9--INVENTORY
Date: 07/18/19
Chain Management

At Dot Com, a large retailer of popular books, demand is constant at 20,400 books per year. The cost of placing an order to
replenish stock is $15, and the annual cost of holding is $6.00 per book. Stock is received 6 working days after an order has
been placed. No backordering is allowed. Assume 275 working days a year.

a. What is Dot Com's optimal order quantity?

The economic order quantity is:

2DS
EOQ = ,
H

where D is demand in books per year, S is the cost of placing an order, and H is the holding cost per book per year.

2 20,400 15
Dot Com's optimal order quantity is = 319 books.
6.00

b. What is the optimal number of orders per year?

The optimal number of orders per year is:

D
ONO = ,
EOQ

where D is demand in books per year and EOQ is the economic order quantity in books.

20,400
The optimal number of orders per year is = 64 orders.
319

c. What is the optimal interval (in working days) between orders?

The optimal interval between orders is:

W
Optimal interval between orders = ,
ONO

where W is working days per year and ONO is the optimal number of orders per year.

275
The optimal interval between orders is = 4.3 days.
64

d. What is demand during the lead time?

The demand during lead time is:

Demand during lead time = dL,

where d is demand in books per year divided by the number of working days per year and L is the number of days after an
order has been placed that the stock is received.

20,400
The demand during lead time is 6 = 445 books.
275

e. What is the reorder point?

The reorder point is:

Reorder point = dL + safety stock,

where d is demand in books per year divided by the number of working days per year and L is the number of days after an
order has been placed that the stock is received.

The reorder point is 445 + 0 = 445 books.

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A6: CH 9--INVENTORY-Mohammed Alzahrani https://xlitemprod.pearsoncmg.com/api/v1/print/om

f. What is the inventory position immediately after an order has been placed?

The inventory position is:

Inventory position = OH + SR − BO,

where OH is on-hand inventory, SR is scheduled receipts, and BO is backorders.

The inventory position is 445 + 319 − 0 = 764 books.

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