3. A company orders a single inventory item from an external supplier. The compa

Question

3. A company orders a single inventory item from an external supplier. The company anticipates the following monthly demands for this item over the next eight months: 20, 15, 35, 20, 10 55, 25, and 10. The company currently has 4 units in stock. At the end of month 8 they require an ending inventory of 2 units. Each order placed by the company costs $50. The company estimates that its holding cost is $1 per unit per month Due to the high demand for this product from other purchasers, the supplier has a imposed a limit of 30 units per month The company seeks a planned order release schedule for this item (a) Demonstrate that a feasible solution to this problem exists an initial feasible solution.

Explanation / Answer

Feasible solution will be like the followwing

Hoding cost is less than order placing cost so the company should order 30 units per month.

Total required units=+Monthly demands+Closing inventory-Opening inventory=190+2-4=188 units

Month 1 2 3 4 5 6 7 8 Demand 20 15 35 20 10 55 25 10 Opening inventory 4 14 29 34 14 34 9 12 Order placed 30 30 30 0 30 30 28 0 Closing inventory 14 29 34 14 34 9 12 2 Holding cost 14 29 34 14 34 9 12 2 Ordering cost 50 50 50 50 50 50 50 0 Total cost 62 79 84 64 84 59 62 2

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