Inventory Control

a) Outline three benefits and three drawbacks of holding stock?

b) With the aid of a well labeled diagram, discuss the relationship between holding and setup costs.

c) A local community college uses photocopying paper at a relatively constant rate of 200 packages per day. The college is open 250 days per year. The cost of a packet of paper is $25

d) The following information is available about the operation and purchase of the paper:

Ordering cost : $60. / order

Annual holding cost per unit : 20.% of cost per unit

Desired cycle service level : 95%

Lead time : 4 days

Standard deviation of daily demand : 3 units per day

Current on-hand inventory is 900 units, with no open orders or backorders.

i. What is the EOQ?

ii. What is the number of order placed per year?

iii. What would be the average time between orders?

iv. What is the ROP?

v. An inventory withdrawal of 100 units was just made. - Is it time to reorder?

vi. If the store currently uses a lot size of 1300 units, determine the annual holding cost and the annual ordering cost of this policy?

vii. What would be the annual cost saved, if any, by shifting from the 1300-unit lot size to the EOQ?