Inventory Management and EOQ Evaluation for Carl's Computer
Added on -2019-09-22
This article evaluates the EOQ for two parts A233 and P656, discusses ordering policies, price breaks, problems in inventory management, and a plan for controlling inventory for Carl's Computer. The article suggests using purchase orders, investing in inventory tracking software, and implementing an online inventory management system to efficiently manage inventory. The plan for controlling inventory includes reducing lead time, using ABC analysis, identifying obsolete stock, and preparing inventory budgets in advance.
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Carl’s Computer11. Evaluation EOQ for two parts A233 (circuit board) and P656 (power supply): A233 CircuitBoard- Lead time is 7days, 32 units are weekly demand, annual demand comes to 1664 units(32*52weeks). Per unit cost for the part is $18 and order cost is $16 per order, and lot size is 64units per order. Holding cost per unit comes to $4.14/unit is $4.14 (18*23%). Total material costis $29952 (1664*18). Total holding cost is $132.48. Total ordering cost is $416. Total amountspent = $30500. P656 Power Supply- Lead time is 14 days, weekly demand is 120 units perweek, annual demand for this part is 6240 units (120*52weeks). Unit cost is $35 per unit. Ordercost is $2 per order. Lost size is 350 per order. Holding cost per unit $8.05 ($35*23%). Totalmaterial cost is $218400 (6240*$35). Total holding cost is $1408, and total ordering cost is$35.65. Ordering policies that can be used in the company- Usage of purchase orders help businesses inkeeping the track record of their activities related to purchasing. The firm can make use of theseorders to see whether or not supplier has sent correct goods. Keep track of records whichaccompany with the orders which have been received and confirm all the goods matches packinglist. Purchasing management is significant and time-consuming. The firm should consider unitcost, extended cost, lead time and shipment rejection for efficient management of inventory(Thomas E.. Vollmann, et. al. 1997).2. Sellers save by minimizing carrying costs, and they also save by giving price breaks to thepurchaser. Usually, price breaks are given in bulk quantities. Greater the size of the order lesserwill be the average price incurred. Price breaks come in use when inventory prices vary to thesize of order. EOQ is calculated foe every price that is possible, and then need to be compared tothe level of inventory which will be readily available at that price. If the volume of inventoryrequired in readily available in the price break of $2 then this option should be considered by the
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