A grocery shop buys toilet paper rolls from Georgia pacific and the weekly deman

Question

A grocery shop buys toilet paper rolls from Georgia pacific and the weekly demand of rolls has some high fluctuation as given in the table below. A 6 roll pack costs $3.00 and holding cost are based on a 20 percent annual interest rate for a 52-week year. The cost of ordering is $5.00. Determine the optimal P9Q policies for the rolls during the 12 week period. week 1 7 89 10 11 12 Total AVE 3 4 6 6-roll 30 40 50 65 35 19 13 15 165014 13360 30 ck 6 POQ 1 policy D 30 40 50 65 35 19 13 15 6 50 14 13 BI

Explanation / Answer

Annual holding cost per item = $3.0 x 20% = $0.6
Weekly holding cost per item (Ch) = $0.6 / 52 = $0.01154

Average weekly demand (D) = 30; Ordering cost (Co) = $5.0
EOQ = (2.D.Co/Ch)1/2 = SQRT(2*30*5/0.01154) = 161.24 ~ 161

Time between orders (TBO) = EOQ/D = 161/30 = 5.37 ~ 5 periods

So, for every 5 periods, replenish the exact quantity required

Week 1 2 3 4 5 6 7 8 9 10 11 12 Dt 30 40 50 65 35 19 13 15 16 50 14 13 BI 0 190 150 100 35 0 94 81 66 50 0 13 POQ 220 113 27

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