D=

Ordering cost =
Carrying cost =
Purchasing cost =
Lead time
No of woking days

1,
EOQ =
2,
Number of order =
3, Reorder point
- Demand each day = D/ number of work

- Demand each week = D/ number of we

- Lead time = 4 weeks

- Reorder point =
 24,200 rolls
$ 175 per order
15% purchasing cost
$ 10 per roll
4 weeks
260 days

2,376.27 rolls

D/EOQ 10 orders

each day = D/ number of working days

93 rolls per day
each week = D/ number of weeks
465 rolls per week
me = 4 weeks
1,862 rolls
Demand 7,000 TagMe watches
Ordering cost $ 300 purchase order
Carrying cost $ 14 per wristwatch
Purchasing costs $ 75
Lead time 10 days
SP $14 per watch
1,
EOQ 548 watches
2,
Number of order = D/EOQ 13 orders
3,
Demand each working day 19.18 watches
Reorder point 192 watches
b, Inventory under JIT = 30% * $1,500,000 = 450,000
2, Review the features of JIT (slides 30)
TieNeek should consider qualitative factors when adopting JIT production:
- Reengineer/ reorganize the production system, integrating the manufacturing cells in
sequence to ensure smooth production process, trace materials handing, machine operating,
inspection to manufacturing cells -> cost saving in terms of material handing, setup, space costs.
- Redesign the products to facilate the use of standardized materials and reduce manufacturing time
- Ability to negotiate a long term contract with reliable supplies who can deliver quality materials in
small and frequent orders in a timely manner and shorten the lead time.
- Ability to train workers to be multi-skilled to shorten manufacturing time but still ensure the quality of
products

3, Performance measures under JIT

;- Financial measures: inventory turnover, stockout costs, rework costs…
- Non-financial measures: manufacturing leadtime, setup time, units produced per hour, number of defective units
ERP: a system with a single database that collects data and feeds into software applications supporting all busines
functions and activities. The benefits of ERP include close coordination among business functions, enhanced com
of information among functions and with suppliers/customers so the flow of information is consistent, linked, hig
accurate and smooth across the business to support business planning and decision making.
 Relevant costs Relevant costs
1, under system under JIT
Annual additional tooling
costs $ - $ 280,000
Required rate of return on
inventory investment $ 300,000 $ 90,000
Insurance, space,
materials-handling and
setup costs $ 300,000 $ 210,000
Rework costs $ 200,000 $ 160,000
Increase in revenue $ (320,000)
Total $ 800,000 $ 420,000

Net benefit of adopting JIT production is a cost saving of $380,000 ($800,000-$420,000)

ing cells in
chine operating,
g, setup, space costs.
duce manufacturing time
liver quality materials in

but still ensure the quality of

ced per hour, number of defective units as % of total units produced

are applications supporting all business
ong business functions, enhanced communication
f information is consistent, linked, highly
ecision making.
 1, EOQ
2, Reorder point
Weekly demand
Purchasing lead time
Reorder point
3, computation of safety stock
Number of order in a year
Safety
stock
level in
units
(1)
- Warehouse WH1 should hold a safety stock of 500 pairs. -
- Demand level resulting in stockouts – Inventory available during
lead time (excluding safety stock), 3,750 units – Safety stock.
- As a result, reorder point with safety stock = 3,750 pairs + 500 pairs = 4,250 pairs 250
500
- At a safety stock level of 500 units, no stockout will occur and, hence, expected stockout costs = $0
-> When safety stock level is
Reorder point with safety stoc
Reorder quantity is not affecte
 4,743 pairs of shoes
2, Reorder point
Weekly demand 3,750 pairs of shoes per week
Purchasing lead time 1 week
Reorder point 3,750 pairs of shoes
3, computation of safety stock for warehouse WH1 when reorder point is 3,750 pairs of shoes
Number of order in a year 38 orders trong 1 lan dat hang
Demand
Relevant Number
levels Probability Expected
Stockout in Units Stockout of orders
resulting in of Stockout Stockout costs
Costs per year
Stockouts
(2) (3)=(2)-3,750-(1) (4) (5)=(3)*$3 (6) (7)=(4)*(5)*(6)
4,000 250 0.2 $ 750 38 5,692
4,250 500 0.05 $ 1,500 38 2,846
8,538
4,250 250 0.05 $ 750 38 1,423
- - - $ - - -
stockout costs = $0
-> When safety stock level is 500 pairs of shoes, annual relevant stockout and carrying costs are lowest ($1,600)
Reorder point with safety stock = 3,750+500= 4,250 pairs of shoes
Reorder quantity is not affected by holding safety stock
 Relevant Relevant
carrying costs total costs

(8)=(1)*$3.2 (9)=(7)+(8)
- 5,692 khong giu tru hang ton kho thi se bi phat sinh chi phi cao
- 2,846
8,538
800 2,223
1,600 1,600 no longer have stockout

osts are lowest ($1,600)

Demand
Variable cost
Carrying cost

1, Under a MRP system:

Annual cost of producing and
= Variable production cost + S
= $54*48,000 + ($10,000 × 12
$ 2,746,000
( 12 = 48,000/4,000)
2,
EOQ
Production of 48,000 per year
produced in 6.4 batches per ye
per year, which means a produ

Annual cost of producing and

= Variable production cost + S
= $54*48,000 + ($10,000 × 7)
$ 2,720,285
( 7 = 48,000/7,515)
3,
Under a JIT system
Annual cost of producing and
= Variable production cost + S
= $54*48,000 + ($500 × 80) +
$ 2,637,100
( 80 = 48,000/600)
 48,000 J-pods
$ 54 per J-pod
$ 17 per year

der a MRP system:

al cost of producing and carrying J-Pods in inventory
riable production cost + Setup cost + Carrying cost
4*48,000 + ($10,000 × 12 months) + [$17 × (4,000 ÷ 2)]

= 48,000/4,000)

7,515 I-pod per batch

uction of 48,000 per year divided by a batch size of 7,515 would imply J-Pods would be
uced in 6.4 batches per year. Rounding this up to the nearest whole number yields 7 batches
ear, which means a production size of 48,000 ÷ 7 or 6,857 J-Pods per batch.

al cost of producing and carrying J-Pods in inventory

riable production cost + Setup cost + Carrying cost
4*48,000 + ($10,000 × 7) + [$17 × (6,857 ÷ 2)]
I-pod per batch
48,000/7,515)

r a JIT system
al cost of producing and carrying J-Pods in inventory
riable production cost + Setup cost + Carrying cost
4*48,000 + ($500 × 80) + [$17 × (600 ÷ 2)]
I-pod per batch
= 48,000/600)
1, Relevant cost of purchasing from X an

Relevant Items
Purchasing costs
Ordering costs
Inspection costs
Required annual
return on investment
Stockout costs
Returned costs
Other carrying costs
Total costs
t cost of purchasing from X and Y

X Y
$ 1,176,000 $ 1,152,000
$ 900 $ 720
$ 4,500 $ 12,000

$ 1,764 $ 1,728
$ 600 $ 1,890
$ 2,000 $ 15,000
$ 750 $ 750
1,186,514 1,184,088