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Question: Hospital purchasing agent Abby Smith needs to order examination gloves for the hospital. Currentl...
Hospital purchasing agent Abby Smith needs to order examination gloves for the hospital. Currently, she orders 1,000 boxes of gloves whenever she thinks there is a need. Abby has heard that there is a better way to make this purchase and wants to use economic order quantity (EOQ) to determine how much to order and when to order. She collects the following information
Cost of the gloves: $4.00/box
Carrying costs: 33% or $1.33/box
Cost of ordering: $150/order
Lead time: 10 days
Annual demand: 10,000 boxes/year
1. What is the hospital's average daily demand for gloves?
2. This number is based on a sample collected during how many sampling periods?
3. Assuming that Abby is not worried about safety stock, she should reorder gloves when her inventory level reaches ________ units?
Explanation / Answer
HOSPITAL’S AVERAGE DAILY DEMAND FOR GLOVES = 27.40
( More could have been answered if more details provided )
Reorder point = Average daily demand x Lead time ( days) = 27.40 x 10 = 274
SHE SHOULD REORDER GLOVES WHEN HER INVENTORY LEVEL REACHES 274 UNITS
SHE SHOULD REORDER GLOVES WHEN HER INVENTORY LEVEL REACHES 274 UNITS
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