DDA 305 – ASSIGNMENT NUMBER 2

JEROME CASEM ORATE

CLUSTER HEAD
UNION GALVASTEEL CORPORATION-LA UNION
 MANUFACTURE OF GALVANIZED STEEL PRODUCTS
 SUPPLY AND INSTALLATION

1. Economic Order Quantity Model

Unit: Metric Tons (MT)
 Background: In our organization, we use Safety Stock (Min-Max) JIT- Reorder Quantities based on Sales Forecast and calibrated by Material Planning and
Inventory Control Department based on monthly and quarterly batting average since we have various raw materials (thickness, color, width, paint technology,
aluminum-zinc coating etc) ordered in bulk and at once from one supplier, all having different purchase cost per unit. But for the sake of discussion, an EOQ
model can be illustrated using our inventory as follows:

Annual Disposal: 13,000 MT

Purchase Cost: $811/MT
Ordering Cost: $110
Holding Cost: $6.6

Using the Wilson EOQ Formula which:

 Assumes that annual/quarterly/monthly demand is fixed
 Assumes that Purchase Cost is fixed

EOQ= 658.281 MT

For a year, we should reorder 20 times at most or every 3 weeks.

We got that from dividing the annual disposal of 13,000 with the EOQ.
This is supposedly the optimal point wherein handling/inventory cost
And ordering cost will give us better bottom lines with optimal
Inventory movements.

Although this is not realistic for us since our raw materials are imported and that we do purchases on a fixed quarterly basis based on our rolling targets (factoring in
special projects), forecasting and actual monthly disposal.

Other ways we manage our inventory is interdepartmental from Sales, Finance, Roll forming and Distribution.