Joshue Glenn Catubag

PRODUCTION AND OPERATIONS MANAGEMENT

MBA 2 Regular | Afternoon Class

FA5 Supply chain and inventory management

Problem 1

A firm has 1,000 “A” items (which it counts every week, i.e., 5 days), 4,000 “B” items (counted
every 40 days), and 8,000 “C” items (counted every 100 days). How many items should be
counted per day?

Number of Item to
Item Quantity Policy Count per Day
A 1,000 Every 5 days 1,000/5 = 200/day
B 4,000 Every 40 days 4,000/40 = 100/day
C 8,000 Every 100 days 8,000/100 = 80/day
Total items to count 380/day

Problem 2

Assume you have a product with the following parameters:

Demand = 360
Holding Cost per year - $1.00 per unit
Order Cost = $100 per order
What is the EOQ?
Problem 3

Phil Carter, President of Carter Computer Components, Corp. has the option of shipping computer
transformers from its Singapore plant via container ship or airfreight. The typical shipment has a value of
$75,000. A container ship takes 24 days and costs $5,000; airfreight takes 1 day and costs $8,000.
Holding cost is estimated to be 40% in either case. How should shipments be made? Why? Phil Carter,
President of Carter Computer Components, Corp. has the option of shipping computer transformers
from its Singapore plant via container ship or airfreight. The typical shipment has a value of $75,000. A
container ship takes 24 days and costs $5,000; airfreight takes 1 day and costs $8,000.

Holding cost is estimated to be 40% in either case.

a) What is the total landed cost via container ship?
b) What is the total landed cost via airfreight?
c) How should shipments be made? Make your assumptions and explain your recommendation.