INTERNATIONAL UNIVERSITY

SCHOOL OF BUSINESS

ASSIGNMENT
INVENTORY MANAGEMENT

Course: Logistics and Supply Chain Management

Lecturer: Mr. Nguyen Hoang Huy
Student name: Nguyen Vuong Thien Kim
Student ‘s ID: BABAWE18099
 EXERCISE 1

Item 2 6 4 7 1 8 10 5 9 3
Annual use 23.4 19.8 11 2.7 2 1.3 1.2 1.12 0.48 0.32
(‘000s)
Cum. 23.4 43.2 54.2 56.9 58.9 60.2 61.4 62.52 63 63.32
Annual use
Cum % 37 68.2 85.6 89.9 93 95 97 98.7 99.5 100
annual use
Category A A B B C C C C C C
Item 1 2 3 4 5 6 7 8 9 10
Annual use 2 23.4 0.32 11 1.12 19.8 2.7 1.3 0.48 1.2
(‘000s)
Conclusion: Item A should be given the most attention

EXERCISE 2
Item 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Annual 12.6 15.3 1.15 13.5 34.2 4 2.84 2.08 9.632 2.948 1.02 23.8 4.75 0.03 0.82
use 7
(‘000s)

Item 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Annual 3.66 2.4 4.05 2.25 60.8 2.73 57 81.3 43.2 91.35 7.32 11.25 4.95 7.36 4.125
use
(‘000s)
 Item 25 23 20 22 24 5 12 2 4 1 27 9 29 26 28
Annual 91.3 81.3 60.8 57 43.2 34.2 23.87 15.3 13.5 12.6 11.25 9.632 7.36 7.32 4.95
use 5
(‘000s)
Cum. 91.3 172.6 233.4 290.4 333.6 367.8 391.7 407.0 420.5 433.1 444.3 454.00 461.36 468.68 473.63
Annual 5 5 5 5 5 5 2 2 2 2 7 2 2 2 2
use
Cum % 17.8 33.69 45.55 56.67 65.10 71.78 76.44 79.42 82.06 84.51 86.71 88.59 90.02 91.45 92.42
annual 2
use
Categor A A A A A B B B B B B B B C C
y

Item 13 30 18 6 16 10 7 21 17 19 8 3 11 15 14
Annual 4.75 4.125 4.05 4 3.66 2.948 2.84 2.73 2.4 2.25 4.75 4.125 1.02 0.82 0.03
use
(‘000s)
482Cu 478.3 482.5 486.5 490.5 494.2 497.1 500.0 502.7 505.1 507.3 478.3 510.6 511.6 512.4 512.4
m. 82 07 57 57 17 65 05 35 35 85 82 15 35 55 85
Annual
use
Cum % 93.35 94.15 94.94 95.72 96.44 97.01 97.56 98.10 98.57 99.00 93.35 99.64 99.83 99.99 100.0
annual
use
Catego C C C C C C C C C C C C C C C
ry
 EXERCISE 3
R = 70

H = 27

D = 16500 units/year

Operating days = 320 days

a. Optimal order quantity per order

2 RD
EOQ = √
H
= √ 2∗70∗16500
27
= 292.5 units

b. Total annual inventory costs

RD HQ
C=
Q
+ 2
= (70∗16500) + (27∗292.5) = $7897.5
292.5 2
c. Optimal number of orders to place per year
16500/292.5 = 57 orders
d. Number of operating days between orders, based on the optimal ordering
320/57 = 5.61 days

EXERCISE 4

D = 1,415,000 sq. yards / year

R = $2,200
H = $0.08

a. Economic order quantity

2 RD
EOQ = √
H
= √ 2∗2,200∗1,415,000
0.08
= 278,971 yards
b. Minimum total annual cost
RD HQ 2,200∗1,415,000 0.08∗278,971
C=
Q
+ 2
= 278,971
+ 2
= $22317.7
c. Optimal number of orders per year
1,415,000/278,971 = 5.07 or 6 orders
d. Optimal time between orders
365/6 = 60.83 days

EXERCISE 5

D = 4000 gallons of gasoline/month => D = 4000*12 = 48,000 gallons /year

R = $50.7
H = $0.3

 How large should the station’s orders be?

2 RD
EOQ = √
H
= √ 2∗50.7∗48,000
0.3
= 4027,9 gallons /order
 How many orders per year will be placed?
48,000/4027.9 = 12 orders

 How long will it be between orders?

365/12 = 30.4 days or 1 month

 If lead time is two weeks, what is the order point? If the lead time is 10 weeks, what is the reorder points?
Assume 1 week = 1/52 year
L = 2 weeks => reorder point = L*D = 2*48000/52 = 1846 gallons
L = 10 weeks => reorder point = L*D = 10*48000/52 = 9230 gallons

EXERCISE 6

D = 5000 boxes per year

R = $80 per order
H = $0.50 per box
L = 4 days
a. Optimal order size
2 RD
EOQ = √
H
= √ 2∗80∗5000
0.5
= 1264.9 boxes / order
b. Minimum total annual inventory cost
RD HQ 80∗5000 0.5∗1264.9
C=
Q
+ 2
= 1264.9
+ 2
= $632.5
c. Reorder point
5000
L*D = 4 *
365
= 54.8 boxes

EXERCISE 7

D = 20 gallons/day
SD = 4 gallons
L = 12 days

 Determine the safety stock and reorder point if the restaurant wants to maintain a 90% service level
Safety stock = Z*SD*√ L = 1.28*4*√ 12 = 17.7 gallons (1)
Reorder point = LD + safety stock = 12*20 + 17.7 = 257.7 gallons
 What would be the increase in the safety stock if a 95% service level were desired?
Safety stock = Z*SD*√ L = 1.64*4*√ 12 = 22.7 gallons (2)
Increase in safety stock is (2) – (1) = 22.7 – 17.7 = 5 gallons

EXERCISE 8

D = 4000 yards/day
SD = 600 yards
L = 7 days

Determine the safety stock and reorder point if the company wants to limit the probability of a stockout and work stoppage to 5%
Safety stock = Z*SD*√ L = 1.64*600*√ 7 = 2,603.4 yards
Reorder point = LD*safety stock = 7*4000 + 2603.4 = 30,603.4 yards