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Lgt 3105 Operations Management - Individual Assignment Case Study – Jamie Chang

Autor:   •  March 11, 2018  •  2,123 Words (9 Pages)  •  89 Views

Page 1 of 9

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After the above adjustments, the new EOQ was calculated as follows:

Product

Yearly Demand (Units)

Present Order Quantity

Setup Hour

per Order

Product Unit Cost($)

Appropriated

EOQ

A

3,200,000

140,000

6.0

1.195

38218.21

B

2,000,000

80,000

5.0

0.587

39353.61

C

5,600,000

300,000

6.5

0.605

73956.55

D

1,200,000

100,000

4.5

0.745

25669.8

E

400,000

60,000

4.0

1.041

11820.57

F

960,000

160,000

2.5

0.625

18683.97

G

320,000

40,000

4.5

0.815

12673.78

H

1,440,000

180,000

3.0

0.878

21149.41

1,060,000

241525.9

The formula is √(2*annual demand*setup hour per order*setup cost per hour)/(holding cost percentage*product unit cost)

For each product:

Product

The formula

EOQ

A

√(2*3,200,000*6*10)/(.22*1.195)

38218.21

B

√(2*3,200,000*5*10)/(.22*0.587)

39353.61

C

√(2*3,200,000*6.5*10)/(.22*0.605)

73956.55

D

√(2*3,200,000*4.5*10)/(.22*0.745)

25669.8

E

√(2*3,200,000*4*10)/(.22*1.041)

11820.57

F

√(2*3,200,000*2.5*10)/(.22*0.625)

18683.97

G

√(2*3,200,000*4.5*10)/(.22*0.815)

12673.78

H

√(2*3,200,000*3*10)/(.22*0.878)

21149.41

Q2. What did Jamie Chang overlook in the EOQ study shown to Garcia?

In the case, after Jamie gave the incorrect EOQ study to Garcia, and considered what Garcia response, it already showed that what Jamie did overlook.

Jamie did compute the EOQ, and believed it can help to ease the existing problem of the company. Jamie’s EOQ study only presented the optimal order quantity of each product and showed that it could obtain a deduction of inventory of each product. However, Jamie did overlook the effect of implementing EOQ in reality. It will then affect the setup cost, inventory holding cost and the total cost. Total cost is the sum of setup cost and inventory holding cost, which can be calculated by using this formula:

Total Cost = (Quantity * Holding cost)/2 + Annual demand/Quantity * setup cost (Assumption: Excluding the product cost in the calculation as it does not have a huge effect in the result)

Present Order Quantities

Product

Order quantity

Product unit cost($)

Setup Hours

Total Setup cost($)

Total Holding Cost($)

Total cost($)

A

140,000

1.195

137.1

1,371

18,403

19,774

B

80,000

0.587

125

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