Inventory Management Assignment Solution - [University Name]

This assignment solution focuses on inventory management principles, addressing key concepts such as Economic Order Quantity (EOQ), reorder points, and inventory control systems. The solution explores the implications of inventory withdrawals, and safety stock calculations within the Q-system. The document covers topics like inventory costs, fixed period inventory systems, and the importance of EOQ in optimizing resource utilization. The student's work analyzes scenarios involving inventory levels, providing answers to specific questions related to inventory management practices, and the impact of different inventory decisions on businesses. The assignment also includes a bibliography of relevant academic sources.

Running head: INVENTORY MANAGEMENT
Inventory Management
Name of the Student:
Name of the University:
Author’s Note:

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INVENTORY MANAGEMENT
Table of Contents
Question 1......................................................................................................................2
Question 2......................................................................................................................3
Question 3......................................................................................................................4
Question 4......................................................................................................................5
Question 5......................................................................................................................6
Question 6......................................................................................................................6
Question 7......................................................................................................................8
Question 8......................................................................................................................9
Bibliography.................................................................................................................10

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INVENTORY MANAGEMENT
Question 1
Ans no Particulars Formula Amt
Average Weekly Demand (units) 200
Number of days in a week 5
Number of weeks in a year 50
Annual demand (units) D 10000
Standard Deviation (units) 16
Purchase Price per unit C 12.50$
Supply Lead Time (weeks) L 4
ordering costs S 40.00$
Carrying Costs H 2.50$
a Optimal Order Cost (EOQ) sqrt((2DS/H)) 565.6854
b Safety Stock SS 74.56
If lead time is reduced than
Lead time (weeks) L 2
Z(at 99%) Z 2.33
Standard deviation SD 16
Safety Stock SS 52.72188
c Percentage Reduction 29.29%
if standard Deviation is reduced
Lead time (weeks) 4
Z(at 99%) 2.33
Standard deviation 8
Safety Stock 37.28
d Percentage Reduction 50.00%

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INVENTORY MANAGEMENT
Question 2
d. A withdrawal of 15 units from the inventory would not be affecting the investory stock as
the same is still not close to reorder level. Therefore, the business does not need to reorder
unless the withdrawal reaches the reorder point.

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INVENTORY MANAGEMENT
Question 3
d. The implications of the Costs of Q are the number of units which is to be ordered on a
weekly basis while R represents the reorder level for the business. It is at this level that the
business needs to place an order for the goods

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INVENTORY MANAGEMENT
Question 4
Ans no Particular Amt
No of weeks N 52
Demand units per week (units) 95
Annual demand (units) D 4940
Ordering costs S 58.00$
Holding costs per unit per year H 2.69$
Lead time L 4
Standard Deviation (units0 SD 16
Current service level 90%
Purchase Costs per unit C 10.75$
EOQ sqrt((2DS/H)) 461.762045
TBO (weeks) (sqrt((2DS/H))/D)*N 4.8606531
Reorder level (D/N)*L+SS 83.7526033
Safety stock Z*SD*SQRT(L) 40.96
Current Lot size 490
annual holding costs 658.44$
Annual ordering costs 584.73$
a
b
d
c. In case the business decides to withdraw 10 bags than the same would not result in reorder
point as the business still has 315 bags in hand and therefore it would not affect the reorder
level for the business.
e at EOQ
Ordering costs 620.49$
Carrying costs 620.49$
Purchase costs 53,105.00$
Total costs 54,345.99$
at 490 units
Ordering costs 658.44$
Carrying costs 584.73$
Purchase costs 53,105.00$
Total costs 54,348.17$
Total savings 2.19$

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INVENTORY MANAGEMENT
Question 5
b. The extra safety stock which is required in Q system of inventory system is 14 bags more
which show that proper inventory management practices needs to be initiated in the
operations of the business.
c. The business needs to order at the EOQ level so that optimum utilization resources of the
business are done so that proper inventory and costs are managed.
Question 6

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INVENTORY MANAGEMENT
b. The Economic order quantity would allow the management of the company to properly
understand the quantity which needs to be ordered by the business on regular basis. This
helps the management to understand at which point reorder needs to be made so that a stock
out situation can be avoided. In addition to this, it also helps proper management of
inventories of the business.
c. Fixed period inventory system requires more safety stock options as it can easily reach the
situation of stock out which can affect the operations of the business in adverse manner. The
stock requirement depends on the period when orders are placed and overall withdrawal of
stocks by the business.

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INVENTORY MANAGEMENT
Question 7
Ans no Particular
No of weeks N 52
Demand units per week (units) 1000
Annual demand (units) D 52000
Ordering costs S 15.00$
Holding costs per unit per year H 5.25$
Lead time L 2
Standard Deviation (units0 SD 100
Current service level 97%
Purchase Costs per unit C 35
a Current lot size 900 units
Total ordering costs 866.67$
Total Holding costs 2,362.50$
Product Costs 1,820,000.00$
Total costs 1,823,229.17$
AT EOQ level
EOQ sqrt((2DS/H)) 545.1081151
Total ordering costs 1,430.91$
Total Holding costs 1,430.91$
Product Costs 1,820,000.00$
Total costs 1,822,861.82$
Savings 367.35$
Safety Stocks Z*SD*SQRT(L) 265.8721497
Reorder level (D/N)*L+SS 456.65999
c target level 2065.87215
b

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INVENTORY MANAGEMENT
Question 8

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INVENTORY MANAGEMENT
Bibliography
Battini, D., Persona, A., & Sgarbossa, F. (2014). A sustainable EOQ model: Theoretical
formulation and applications. International Journal of Production Economics, 149,
145-153.
Ghasemi, N., & Afshar Nadjafi, B. (2013). EOQ models with varying holding cost. Journal
of industrial mathematics, 2013.