Problem 2: Schedule based on EOQ and give the EOQ and costs. Round down for EOQ.

Question

Problem 2: Schedule based on EOQ and give the EOQ and costs. Round down for EOQ. Multiple Q are not allowed In each week only one order release is possible. Only look for net requirement of the next 2 weeks and then order only if they are not satisfied Lead Time= 2 weeks EOQ= Setup costs 300 $ Setup cost- Holding cost- 15 $/week and consider all weeks Stockout cost20 $/week Holding Cost- cost = Total= Period: 1 2 4 5 6 7 0 3 9 20 20 50 10 Gross requirement On hand begin of period25 On hand end of period Net requirement Planned order receipt Planned order release 15 30 60

Explanation / Answer

EOQ = SQRT(2AS/h) where A is average demand and S is Set up cost and h is holding cost per week

A = (0+15+10+20+20+50+10+0+30+60)/9 = 205/9 = 22.77778

S is given as $300 and h= $15/week

EOQ = SQRT(2*22.7778*300/15) = SQRT(911.111) = 30.18

POQ is similiar to EOQ but with shortages POQ = SQRT(2AS/h)*SQRT((p+h)/p) where p is shortage cost, given as $30 per week

Therefore, POQ = 30.18 * SQRT(45/30) = 36-968, say 37 units

Number of setups four

Inventory carried forward=80 Total Shortages= 77

Period 1 2 3 4 5 6 7 8 9 Gross requirement 0 15 20 20 50 10 0 30 60 On hand begin of period 25 25 10 27 7 11 On hand end of period 25 10 27 7 11 Net requirement 0 0 0 43 Planned order receipt 0 0 37 0 37 37 37 Planned order release 37 37 37 37 Stockout 0 0 0 0 6 16 19 42

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