Problem 1

At the beginning of every month, a bicycle manufacturer, based in Monterrey, Mexico, places an
order to procure lightweight steel tubes from their suppliers based in Leon, Mexico. Their average
requirement is 1000 tons per week, and the procurement lead time is 14 days. Determine cycle and
pipeline inventory. Assume 4 weeks in a month.

Problem 2

Leon Cardiology Centre in Mexico buys 25,000 stents each year from its suppliers in Germany. Each
stent costs $1500, and carrying cost is 26% of the value of the average inventory of stents per year. If
the ordering cost is $270 per order, determine the economic order quantity for stents. Also,
determine the number of orders and the TICs.
Problem 3

SleepWell Mattresses manufactures high-quality spring-based cotton mattresses. A set of eight

identical stainless steel springs are used to produce a mattress. The inventory holding cost for
springs is $2.15 per spring per year. SleepWell has estimated an annual demand for 20,000
mattresses. Determine the quantity of springs SleepWell should procure to minimize the TICs for
springs if the ordering cost per order is $50? Also, compute the average inventory level.

Problem 4

Compute the economic lot size for an item that has an annual demand of 5000 units. Assume the
inventory holding costs are based on an annual interest rate of 20%. Further, the purchase cost of
the item is $10 and the ordering cost is $25.20 per order. Also, compute the cycle time if there are
250 workdays in a year.
Problem 5

Sun Corporation is a retailer of school notebooks. They buy notebooks from a wholesaler at $0.50
and sell it to consumers at $0.85 per notebook. The demand for notebooks is estimated at 9000 per
quarter. If the ordering cost is $4 per order and carrying cost is based on an annual interest rate of
15%, compute the economic order size.

Solved Problem 6

Based on the following data for an item, what lot size would be economical to procure? • Usage:
2000 units per year • Purchase cost of the item: $2 • Inventory holding rate: 25% per annum • Fixed
delivery charges and cost of receiving goods: $5 per shipment
Problem 7

The EOQ for an item is 150 units and its annual demand is 2400 units. If the ordering cost per order
is $20 per order, compute the implied carrying cost for this item.

Problem 8

A firm sells an item that has an annual demand of 1000 units. If the procurement lead time is a
constant 5 days, find the reorder level. Assume 365 workdays a year.
Problem 9

Consumption of a bought-out item in a manufacturing organization is 100 per day. The supplier
supplies this item to the manufacturer at the rate of 300 per day. If thecarrying cost is $0.1 per item
per day and the ordering cost is $250 per order, compute the EOQ for this item.

Problem 10

Table shows inventory data collated for one item. Compute the following: (a) Inventory carrying rate
(b) The annual carrying cost of an item that costs $20(c) The total annual carrying cost for 15 items
that cost $20 per unit (d) The total carrying cost for 15 items that cost $20 per unit and are held in
inventory for a period of 2 years