Class Activity solutions - Stock levels 2021 PDF

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Class Activity: Material stock levels Problem A Two materials Alfa and Beta are used in a production as follows: Minimum Usage 50 Units per Week each Maximum usage 150 Units per Week each Normal Usage 100 Units per Week each quantity

100 x 50 = 5 000 units EOQ or re-order

Re-order quantity A - 600 Units, B-1000 Units. Lead time A - 4 to 6 weeks, B – 2 to 4 weeks. Calculate various stock levels for each material: 1. 2. 3. 4.

Re-order level Minimum stock level Maximum stock level Average stock level & 5. Estimated No of orders

Problem B If the annual demand for a product is 6,400 units. The cost per unit is P6 and the inventory carrying cost is 25% of unit cost per annum. Required If the cost to procurement per unit is P75, determine the following: 1. 2. 3. 4.

EOQ Number of orders per year Time between two consecutive orders If procurement [ordering cost] decrease from P 75 to P 60 then what is EOQ

Answer: A 1. Re-order Level = Maximum Consumption X Maximum Re-order Period A = 150 Units X 6 weeks = 900 Units B = 150 Units X 4 weeks = 600 Units 2. Minimum Level = Reorder Level – (Normal Consumption X Normal Delivery Period) A = 900 Units – (100 Units X 5 weeks) = 400 units B = 600 Units – (100 Units X 3 weeks) = 300 units Average reorder period has been taken as normal reorder period. 3. Maximum Level Reorder Level + Reorder Quantity – (Minimum Consumption X Minimum delivery time) A = 900 units + 600 Units – (50 units X 4 weeks) = 1,300 Units B = 600 units + 1000 Units – (50 units X 2 weeks) = 1,500 Units 4. Average Stock Level = 1/2 (Minimum Level + Maximum Level) A = ½ (400 units + 1,300 Units) = 850 Units

B = ½ (300 units + 1,500 Units) = 900 Units

5. Estimated No. of orders A = Annual usages / Re- order quantity = 5 000/ 600 = 8 orders B = 5000 / 1000 = 5 times orders Problem B Solution1. Calculation of EOQ

= 800 units 2. No. of orders per year = Annual consumption / Size of one order = 6,400 units / 800 units = 8 orders 3. Time gap between two consecutive orders = 12 months / No. of orders = 12 months / 8 orders = 1.5 months 4. = √2 x 6,400 x 60 / 1.5 = 715 units...