Problem Solving: Inventory Management.

Given data:

Month Demand Units Month Demand Units

1 180 7 130
2 220 8 360
3 190 9 110
4 140 10 280
5 270 11 250
6 210 12 160

One Month Supply

Month Demand Unit delivered Beginning Ending Average

Units Inventory Inventory Inventory
A B C D E (B+E)/2
1 180 180 180 0 90
2 220 220 220 0 110
3 190 190 190 0 95
4 140 140 140 0 70
5 270 270 270 0 135
6 210 210 210 0 105
7 130 130 130 0 65
8 360 360 360 0 180
9 110 110 110 0 55
10 280 280 280 0 140
11 250 250 250 0 125
12 160 160 160 0 80
TOTAL=1,250

Two Month Supply

Month Demand Unit delivered Beginning Ending Average

Units Inventory Inventory Inventory
A B C D E (B+E)/2
1 180 400 400 220 310
2 220 220 0 110
3 190 330 330 140 235
4 140 140 0 70
5 270 480 480 210 345
6 210 210 0 105
7 130 490 490 360 425
8 360 360 0 180
9 110 390 390 280 335
10 280 280 0 140
11 250 410 410 160 285
12 160 160 0 80
TOTAL=2,620

Three Month Supply

 Month Demand Unit delivered Beginning Ending Average
Units Inventory Inventory Inventory
A B C D E (B+E)/2
1 180 590 410 500
2 220 590 410 190 300
3 190 190 0 95
4 140 620 480 550
5 270 620 480 210 345
6 210 210 0 105
7 130 600 470 535
8 360 600 470 110 290
9 110 110 0 55
10 280 690 410 550
11 250 690 410 160 285
12 160 160 0 80
TOTAL=3,690

Less than 500 units: Ordering cost= 58, Carrying cost= 5

500 or more units: Ordering cost= 58, Carrying cost= 4.90

1 month supply- 1,250/12=104.17

2 month supply- 2,620/12=218.33

3 month supply- 3,690/12=307.5

Ordering Cost Carrying Cost Total Cost

1 month supply 12x58=696 104.17
2 month supply 6 x58=348 218.33
3 month supply 4 x58=232 307.5