© Majid Khan@5.5.

2020
©inventory control_Lumpy model (Tutorial 11)

TUTORIAL DYNAMIC EOQ (LUMPY MODEL)

(DR. MAJID KHAN MAJAHAR ALI)

1. Exercise 1 (Do by your own and submit to me via Email)

A company manufactures and sells laser cutting machine for cutting

fabric. The demand for the next 10 weeks for the control panel used in
this machine is shown in the table. This item is ordered from a supplier
and ordering costs are assumed to be $100 per order. Inventory carrying
costs are $1 per unit per period. The beginning inventory of the control
panels is assumed to be 0.

Period(week)
1 2 3 4 5 6 7 8 9 10
Demand 10 30 20 5 65 30 40 10 50 40

Determine the ordering schedule for the next 10 weeks using the
following lot-size policy (assume zero initial inventory) and their
advantage and limitation:

(a) Lot-for-lot.
(b) EOQ.
(c) Periodic order quantity.
(d) Fixed order quantity of 400.
(e) Part period balancing.
(f) Least unit cost.
 © Majid Khan@5.5.2020
©inventory control_Lumpy model (Tutorial 11)

Exercise 2:
The Broadway Electronics Company uses a standardized tape drive unit in
several items that it manufactures. The demand for the unit is lumpy because of
intermittent assembly schedules for various items that use this drive unit. The
company wishes to determine which of several lot sizing rules should be used
for this item. Demand for the coming 12-week period is shown below, based on
the planned end item assembly schedule:

Week
1 2 3 4 5 6 7 8 9 10 11 12
Demand 200 30 10 0 325 100 50 0 50 10 400 10

If ordering costs are $30 per order and holding costs are $0.50 per unit per week,
determine the ordering schedule and total relevant costs for the 12-week period
using the following lot-size policy (assume zero initial inventory):

(a) Lot-for-lot.
(b) EOQ.
(c) Periodic order quantity.
(d) Fixed order quantity of 400.
(e) Part period balancing.
(f) Least unit cost.