SCM 301 Inventory Analysis Assignment 1. You Hear Someone Co

SCM 301 Inventory Analysis Assignment 1. You hear someone comment that

Analyze the debate around whether inventories are signs of waste or essential for effective management. Discuss whether managers can justify holding inventories while still aiming to reduce inventory levels. Identify the two fundamental questions an inventory-control decision rule must answer. Match key terms to their definitions within the EOQ model, such as ordering cost, average inventory, safety stock, and reorder point. Examine how adjusting variables in EOQ and ROP formulas can reduce inventory costs and identify which variables are preferable to change.

Describe the procedure for determining order quantities when price breaks are involved and consider how the process differs if holding costs are a percentage of the price instead of a fixed amount. Calculate EOQ for Mellow’s Online Pet Shop, given demand, costs, and how the EOQ changes with demand doubling. For a retail scenario, compute EOQ, ordering and holding costs, and reorder points, incorporating safety stock and variability in lead time. Analyze a pricing scenario for Nittany Shoe Repair, evaluating the optimal order size, total costs, and pricing strategies based on EOQ and different quantity discounts.

Discuss how EOQ, ROP, and TAC change when a company shifts to internet-based ordering with almost negligible ordering costs, considering the effects on order quantity, costs, and safety stock. Lastly, interpret the key cultural and familial themes in Wolf’s book about a Chinese farm family, focusing on the roles, hierarchy, conflicts, and traditional values such as respect, honor, filial piety, and gender roles, providing insights into family dynamics and conflicts based on property and relationships.

Paper For Above instruction

The role of inventories in business operations has been a longstanding debate among managers and scholars. Some contend that inventories represent waste due to the costs associated with storage, obsolescence, and capital tied up in stock. Conversely, others argue that inventories are essential buffers that facilitate smooth operations, meet customer demand promptly, and enable economies of scale in procurement and production. This paper explores whether inventory holdings are inherently wasteful or necessary and examines the managerial duality of reducing inventory levels while maintaining service levels. Furthermore, it discusses the core questions in inventory control, analyzes the EOQ model's components, and evaluates strategies to optimize inventory management.

Many managers grapple with the question of whether inventories are a form of waste or an asset. While excessive inventory can lead to increased costs and waste, insufficient stock can cause stockouts, lost sales, and customer dissatisfaction. Effective inventory management seeks a balance, justifying inventory holdings as necessary to hedge against variability in demand and supply. Managers routinely aim to reduce excess inventory through techniques such as Just-in-Time (JIT), lean inventory practices, and demand forecasting. Hence, they often seek methods to lower inventory levels without compromising operational effectiveness. The central questions in inventory-control decision rules are: How much inventory should be ordered or produced? and When should the order be placed? These questions underpin models like EOQ and ROP, which mathematically determine optimal order quantities and reorder points based on demand, lead time, and cost parameters.

The EOQ model facilitates the calculation of ideal order size by balancing ordering costs against holding costs. The basic parameters include the annual demand (D), ordering cost per order (S), and holding cost per unit (H). Matching terms to the EOQ model, 5 represents the number of annual orders, 6 corresponds to the ordering cost, 7 indicates average inventory, 10 is the holding cost, 2 reflects variance in lead time, 6 is the variance in demand, 8 is the ROP, and 9 is annual inventory cost. Adjusting variables such as demand (D), order cost (S), or unit holding cost (H) can influence total inventory costs. For example, decreasing order costs permits larger order quantities, reducing total costs, but may increase holding costs. Managers may prefer to change order size or safety stock rather than unit costs, as these are more controllable in practice.

When price breaks are involved, the order quantity determination becomes more complex. The procedure involves evaluating the total cost at different price points, considering the reduced unit price for larger orders, and balancing ordering, holding, and purchase costs. This method typically involves calculating EOQ for each price level and comparing total costs to choose the most economical order size. If holding costs are expressed as a fixed percentage of the purchase price versus a constant amount, the procedure differs slightly. With percentage-based holding costs, the effective H changes as prices change, requiring re-calculation of EOQ at each price point, making the process more dynamic.

For instance, Mellow’s Online Pet Shop, which sells 40,000 bags annually, has an EOQ calculated as the square root of (2DemandOrder cost)/Holding cost. Plugging in the values: EOQ = √(240,00015)/2 = √(1,200,000/2) ≈ 775 bags. When demand doubles to 80,000, the EOQ becomes √(280,00015)/2 = √(2,400,000/2) ≈ 1,095 bags. Notably, the EOQ increases but does not double, illustrating the square root relationship between demand and order quantity.

In a retail setting, such as an office supply store, calculations of EOQ, safety stock, reorder point, and associated costs are critical. For example, with weekly demand of 60 printers, a standard deviation of 12, and a lead time of 3 weeks, the EOQ formula—assuming ordering costs of $2 and annual holding costs of $48—yields an EOQ of approximately 188 printers. The reorder point (ROP) is calculated based on lead time demand, with safety stock added considering demand variability and desired service level. When the lead time's standard deviation increases, safety stock also increases, raising the ROP and inventory costs.

Similarly, the case of Nittany Shoe Repair, which purchases soles at varying prices with quantity discounts, demonstrates the trade-off between purchasing price, order size, and total costs. Under EOQ, the optimal order size might be 62 units, with a maximum of 50 units for the discount bracket. The total cost analysis compares the fixed costs, variable costs, and savings to recommend the best order quantity and price level. Such analyses underpin strategic decisions balancing purchase discounts against inventory holding costs.

Finally, the shift towards internet ordering, exemplified by OfficeMax ordering printers with negligible order costs, fundamentally alters the inventory management landscape. The EOQ tends to increase as setup costs decrease, and total costs diminish, leading to larger, less frequent orders. Holding costs decrease proportionally with lower safety stock needs, and ordering costs nearly approach zero, simplifying the supply chain. These changes can result in significant cost savings and efficiencies but require recalibration of reorder points based on demand variability.

On a broader cultural note, Wolf’s book about a Chinese farm family provides insights into traditional values such as respect, honor, filial piety, and hierarchy. The characters, especially Lim Han-Ci and Lim Chieng-cua, exemplify roles rooted in maintaining family honor and tradition, often at the expense of individual desires or modern values. The conflict depicted between generations, struggles over property, and gender roles highlight the complexities of traditional Chinese family dynamics. Women's subordinate roles, the importance of male heirs, and the emphasis on filial piety reflect ingrained societal norms. These themes are vital in understanding the familial and social fabric of 1930s Taiwan, illustrating how cultural principles influence individual identities and relationships within the family hierarchy.

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