Problem 3: Schedule based on POQ and give the POQ period (show your calculation

Question

Problem 3: Schedule based on POQ and give the POQ period (show your calculation for POQ) and costs. Round up for PoQ Use EOQ calculated in problem 2. Ignore demand of week 1 and 2 for period look up and order release as we have 25 inventory. But first order release happens in week 1 because Lead Time is 2 considering the net demand (net requirement) of week 3 onward. Always look to release orders 2 weeks ahead due to lead time. No overlaps. Once you look for the demands of the periods based on POQ, then order even if the first week demand is zero demand (This will add holding cost, but that is our assumption) Lead Time: 2 weeks Setup cost- 300 $ Holding cost- stockout cost= 15 30 $ per week per unit $perweek Setup cost Holding Cost- Stockout cost- Total= Period: 1 2 15 3 6 9 10 20 25 0 Gross requirement On hand begin of period6 On hand end of period Net requirement Planned order recei Planned order release Stockout 10 20 25 15

Explanation / Answer

EOQ = 25

Da = Average Demand = Average of (10,15, 20,.., 15) = 15.55

Time between orders (TBO) = EOQ/Da = 25/15.55 = 1.607 (or, 2 when rounded off)

So, for POQ, 2 periods will be clubbed together

Now, the text says that we have 25 units of beginning inventory and the table shows 6 units. We have shown the calculation for both.

For Beginning Inventory = 25

For Beginning Inventory = 6

Note:

Our assumption is AIL = (B.I+E.I)/2. Some books will take AIL = (B.I+E.I.+Planned order receipt)/2

Period: 1 2 3 4 5 6 7 8 9 Gross Requirement 10 15 20 25 10 20 0 25 15 On hand begin of period 25 15 0 25 0 20 0 25 0 On hand end of period 15 0 25 0 20 0 25 0 0 Net requirement 0 0 0 0 0 0 0 0 0 Planned order receipt 0 0 45 0 30 0 25 0 15 Planned order release 45 0 30 0 25 0 15 0 0 Average inventory level (AIL) 20 7.5 12.5 12.5 10 10 12.5 12.5 0 Total Holding cost (AIL x $15) $300.00 $112.50 $187.50 $187.50 $150.00 $150.00 $187.50 $187.50 $0.00 $1,462.50 Setup cost $300.00 $300.00 $300.00 $300.00 $1,200.00 Stockout cost $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $2,662.50

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