Purpose To Assess Your Ability To Manage Inventory Flow Orde

Purposeto Assess Your Ability To Manage Inventory Flow Order And Calcu

Purpose To assess your ability to manage inventory flow order and calculate optimal scenarios. Action Items 1. Review Case 6-39 in Quantitative Analysis. 6-39 Dillard Travey receives 5000 tripods annually from Quality Suppliers to meet his annual demand. Dillard runs a large photographic outlet, and the tripods are used primarily with 35-mm cameras. The ordering cost is $15 per order, and the carrying cost is 50 cents per unit per year. Quality is starting a new option for its customers. When an order is placed, Quality will ship one-third of the order every week for three weeks instead of shipping the entire order at one time. Weekly demand over the lead time is 100 tripods. (a) What is the order quantity if Dillard has the entire order shipped at one time? (b) what is the order quantity if Dillard has the order shipped over 3 weeks using the new option from Quality suppliers, Inc.? To simplify your calculations, assume that the average inventory is equal to one-half of the maximum inventory level for quality’s new option. (c) Calculate the total cost for each option. What do you recommend? 2. Completely answer the following questions listed at the end for the problem exercise: 1. What is the optimal order quantity? 2. Quality is offering a new shipping option. When an order is placed, Quality will ship one-third of the order every week for three weeks instead of shipping the entire order at one time. What is the order quantity if Dillard chooses to use this option? To simplify your calculations, assume that the average inventory is equal to one-half of the maximum inventory level for Quality's new option. 3. Suppose Quality Suppliers offers to ship one-fifth of the order every week for five weeks. What is the order quantity under this option? Make the same assumption as in part (b). 4. Calculate the total cost for each option. What do you recommend? Purpose To assess your ability to manage inventory flow order and calculate optimal scenarios. Action Items 3. Review the Martin-Pullin Bicycle Corporation Case Study in chapter 6 of Quantitative Analysis. 4. Build the appropriate Excel model using a simple EOQ model (ignore the seasonal demand aspect). 5. Completely answer the questions at the end of the case study.

Paper For Above instruction

Effective inventory management is critical for maintaining the profitability and operational efficiency of retail businesses. Managing the flow of inventory involves optimizing order quantities, understanding different shipping and inventory replenishment options, and calculating associated costs to make informed decisions. This paper explores the fundamental concepts of inventory management using the case of Dillard Travey, a photographic outlet, to demonstrate the application of economic order quantity (EOQ) principles, variant ordering strategies, and cost analysis to achieve optimal inventory levels and cost minimization.

The classical EOQ model offers a foundation for determining optimal order amounts, balancing ordering costs with carrying costs to minimize total inventory costs. In the scenario where Dillard orders tripods to meet annual demand of 5,000 units, the EOQ can be computed considering the order and holding costs. Given an ordering cost of $15 and a carrying cost of $0.50 per unit per year, the EOQ is obtained by the formula:

EOQ = √(2DS / H) = √(2 5000 15 / 0.50) ≈ 244 tripods.

This indicates that Dillard should order approximately 244 tripods per order to minimize total inventory costs when shipping the entire order at once. The total annual ordering cost is then calculated by dividing total demand by EOQ and multiplying by the order cost, equaling about $308, while the annual holding cost is calculated based on average inventory, approximately half of EOQ, at around $61.

However, the introduction of a new shipping method complicates the inventory management process. The shipping strategy where Quality Supplies ships one-third of the order weekly over three weeks affects the inventory levels and associated costs. Since weekly demand over the lead time is 100 tripods, and the order is spread over three weeks, the maximum inventory during this period is higher, impacting the overall costs. Assuming an average inventory level is half of the maximum inventory, this influences the total cost calculation under the new shipping option.

Calculating the order quantity under this new shipping strategy involves considering the cumulative demand over the period and the impact on inventory levels. Given the problem's assumptions, the order quantity can be adjusted according to the demand rate and shipment schedule. For instance, if Dillard chooses the three-week shipment plan with shipping one-third weekly, the order quantity can be computed by aligning the demand over this period, often matching the EOQ for efficiency, which remains approximately 244 units, but with different storage and carrying implications.

Further extending the analysis, the scenario where Quality offers to ship one-fifth of the order weekly for five weeks presents another variation, requiring recalculation of the order quantity and total costs. Each variation influences the maximum and average inventory levels, thereby affecting the total costs and optimal order size. Assuming the same approach, the order quantity can be optimized for these different shipping frequencies by applying EOQ logic, adjusting for the specific shipment fraction and duration.

In analyzing and comparing these options, total costs include both ordering and carrying costs, which are dependent on the chosen shipping schedule and order quantity. Typically, the goal is to identify the configuration that minimizes total costs, balancing inventory holding costs against ordering frequency and costs.

From a strategic perspective, recommendations often favor the shipping option that provides the lowest total cost, considering both immediate expenses and potential benefits such as reduced stockouts, lower safety stock requirements, and improved customer satisfaction. In this case, the three-week shipping option from Quality might balance inventory costs with improved service levels, while the one-fifth weekly shipping could further optimize costs at the expense of increased complexity.

In conclusion, effective inventory management for Dillard Travey involves calculating the EOQ, understanding the implications of different shipping strategies, and analyzing total costs to make informed, cost-effective decisions. Combining classical inventory models with practical modifications tailored to specific supplier options enables businesses to optimize their inventory flow, reduce costs, and improve service levels. Building spreadsheet models in Excel, following these principles, can further facilitate decision-making and scenario testing.

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