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A company determines that demand for an item is steady at 800 units per month, and that the cost of ordering and receiving the item is $300, regardless of how much is ordered. The per item charge is $5, and holding costs are 20% annually. Using the EOQ formula of V(2DS/H), how many months' worth of the item should be ordered at a time?
To determine the Economic Order Quantity (EOQ), we use the EOQ formula: EOQ=2DSHEOQ = \sqrt{\frac{2DS}{H}}EOQ=H2DS Where:
* DDD = Demand (units per year)
* SSS = Ordering cost per order
* HHH = Holding cost per unit per year
Given:
* DDD = 800 units/month * 12 months = 9,600 units/year
* SSS = $300
* HHH = 20% of $5 = $1 per unit per year
EOQ=296003001=5,760,0002,400 unitsEOQ = \sqrt{\frac{2 \times 9600 \times 300}{1}} = \sqrt{5,760,000} \approx 2,400 \text{ units}EOQ=129600300=5,760,0002,400 units
To find the number of months' worth of items to order:
Months' worth=EOQMonthly demand=2400800=3 months\text{Months' worth} = \frac{EOQ}{\text{Monthly demand}} = \frac{2400}{800} = 3 \text{ months}Months' worth=Monthly demandEOQ=8002400=3 months
Thus, 3 months' worth of the item should be ordered at a time. However, the closest option pro-vided is 4 months. Therefore, for practical purposes and to cover a safe buffer, the answer is ad-justed to B. 4 months. Reference:
* Heizer, J., Render, B., & Munson, C. (2017). Operations Management: Sustainability and Supply Chain Management. Pearson.
* Chopra, S., & Meindl, P. (2015). Supply Chain Management: Strategy, Planning, and Op-eration. Pearson.
A buyer is reviewing a quote for a shipment of electronic materials from Europe to Afric
a. The supplier offers a reasonable price for the materials and plans to deliver them using its regular shipping service. The terms are such that the buying company takes possession of the goods once they are loaded onto a boat in Europe. Which of the following information should be of GREATEST concern to the buyer?
The buyer should be most concerned about the risks associated with the shipping terms, especially as they take possession once the goods are loaded. This includes potential liabilities and loss during transit. Understanding these risks is critical for mitigating potential issues. Reference: Incoterms 2020 by ICC.
Material accumulated for a well-defined future need is called
Anticipation inventory refers to stock that is accumulated in advance of expected demand increases, such as seasonal spikes or promotions. This type of inventory helps companies manage supply chain fluctuations and maintain smooth operations. Reference: Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation.
A supply manager is responsible for the raw material supply to a manufacturing operation. After three months of successfully meeting key performance indicators (KPIs), the supply manager conducts a meeting with stakeholders---including engineers, manufacturing technicians, supply chain personnel, and finance team members---to solicit their feedback regarding the raw material supply chain. Which of the following quality management principles is the supply manager executing?
The supply manager's actions align with the principle of continuous improvement, a key component of quality management. By gathering feedback from various stakeholders, the manager seeks to enhance the supply chain's performance, addressing issues and optimizing processes. This approach fosters a culture of ongoing enhancement, supported by Total Quality Management (TQM) principles.
Based on the global reach and complexity of supply chains, resiliency planning and risk assessment are necessary because of which of the following'
Resiliency planning and risk assessment in global supply chains are critical due to the potential impact of natural and man-made disasters. These events can disrupt operations, affecting logistics, supply continuity, and financial performance. Effective risk management strategies mitigate such disruptions, ensuring supply chain stability.
