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Prepare an inventory policy knowing the following information.

Demand 34,000 per year
Inventory cost of Bs 3.5 per unit per month
The order cost is Bs 400
The selling price of the merchandise is Bs. 35
Cost of goods purchased Bs 20
Lead Time 2 Days
Supplier offers a 3% discount on the total for the purchase of 800 units
SOLVED PROBLEMS MODEL OF
INVENTORIES

Problem #1)The company Sharp Inc. is a company that sells needles.

painless hypodermics in hospitals, wants to reduce its inventory costs
by determining the number of needles that must be obtained in each order.
The annual demand is 1000 units; the handling cost per unit per year is
of 0.50 dollars. Calculate the optimal number of units per order.
Data:
annual demand = 1000
A = $10.00 (cost to process an order)
H = $0.50/unit-year (cost to keep one unit in inventory per year)

a) Optimal number of units per order

1/2
2AD/H = [((2 x 10) x 1000) / 0.50]

Q* = 200 needles/order

b) Number of orders in the year (N)

N = D/Q = (1000 units/order) / (200 units/order)
N = 5 orders

c) Cycle time, expected time between orders (T)

T = Q/D = (200 units/order) / (1000 units/year)
T = 0.2 years/order = 50 days/order

The year is considered to be = 250 working days.

D 1000 units/year
250 days
1 day = ?
SOLUTION:
1000 X 1 ÷ 250 = 4 units/day

Q* = 200

Point Cycle
in order

$100.00

How much to buy? Q*

When to buy? Reorder point (ROP)

How much does the inventory system cost in a year?

d) Reorder point based on inventory.

Demand during delivery time = D(TD)

If the delivery time for this problem is 10 days:

ROP = 4 units/day
10 days = 40 units

When there are 40 units in inventory, the following must be done

order.

e) Annual variable costs of the inventory system (VC)

VC = cost per order + inventory holding costs

 VC = 10 (1000/200) + 0.50 (200/2) = 100

Problem #2) A company sells household items, with a demand

annual of 1,000 units, if the cost to place an order is 10 dollars, the
annual unit storage cost of each item is 2.50 dollars,
the company operates 365 days a year, seven days a week, with a sales cost of
15 dollar item, determine the optimal inventory policy of the Company.
SOLUTION:

Q = 2DS 2(1,000)(10)
OPT
H = 2.50 89.443 units or 90 units

d=
1,000 units/year= 2.74
units/day 365 days/year
_
Reorder point, R = d L = 2.74 units/day (7 days) = 19.18 or 20 units

Problem #3A taxi company consumes fuel at a rate of 8500.

gallons/month. Gasoline costs $1.05/gallon and has an order emission cost
of $1000/order. The cost of holding inventory is 1 cent/gallon/month.

a) Determine when and how much should be ordered, if you want to minimize the cost.
total.
b) Suppose that stockouts are allowed, and that it amounts to 50.
cents/gallon/month.
c) Suppose that the cost of gasoline drops to $1/gallon if they buy, at
less than 50,000 gallons.
d) Suppose that the cost of gasoline is $1.20/gallon if the size of
order is less than 20000 gallons, $1.10/gallon if a2=40000 gallons, and
$1.00/gallon if Q is, at least, 40,000 gallons.
e) Is the data of θ necessary to solve this problem?
SOLUTION:
Section a:
41231 gallons.
Frecuencia (nº de pedidos al mes): 0,21 ; Frecuencia (nº de pedidos al año): 2,47
T* (meses)= 4,85 ; T* (días) = 146

Section b:
41641 gallons
Frecuencia (nº de pedidos al mes): 0,20 ; Frecuencia (nº de pedidos al año) = 2,45

T* (meses)= 4,90 ; T* (días) = 147

Section c:
 41231 gallons
Q2* = 42249 gallons
9337$
8908 $
a = 50000 gallons
Frecuencia (nº de pedidos al mes): 0,17 ; Frecuencia (nº de pedidos al año) = 2,04

T* (meses): 5,88 ; T* (días): 176

Section d:
Q1* = 38568 gallons
Q2* = 40283 gallons
42249 gallons
SITUATION: a1<Q1*<a2<Q2*<Q3*⇒Q*=Q3*=42249 gallons
Frecuencia (nº de pedidos al mes): 0,20 ; Frecuencia (nº de pedidos al año) = 2,41

T* (meses)= 4,97 ; T* (días) = 149

Problem 4

Example
A printer who is currently making a monthly purchase, studied the
behavior of 70 g paper in the last twelve months found that its
demand was: 10, 11, 10, 9, 10, 11, 9, 10.5, 10, 9, 9 and 11.5 tons per month,
estimate the purchase price will be maintained at $2,300,000 per ton, its cost of
Order at $500,000 and by policy adds 15% of the unit cost to the handling of the
inventories plus $55,000 for warehousing, calculate:
The model to be handled under these conditions.
If the supplier offers us a 10% discount for purchases over 30
tons and one of 11% for purchases of 60 tons, how would my policy change.
3. If in addition to the discount we manage to obtain a term that makes our cost of
conservation is reduced solely to storage how my policy would change.

The first thing we must observe is the behavior of the demand which we see
is relatively constant, so we can assume that our model is
behaves according to the parameters of an economic order quantity model
with the following input data:
D = 120 tons per year
$500,000
C = $2,300,000 per ton
Cc = $400,000 ton/year
Therefore
As we can see in this inventory purchasing policy, the company saves
more than 20% in the cost associated with the inventories that I would have if I made a
monthly purchase ( CA = 12*500,000 + [12/2]*400,000 = $8,500,000), which added to the
The savings that would be achieved with the different products handled by the company will allow
important improvements in profitability at the end of the fiscal year.

Regarding question 2:

Alternative 1:

Alternative 2:

Therefore, the 10% discount must be accepted, as in the case of selecting the
scale that offers an 11% discount, the surcharges for inventory management are
higher than the benefits that would be obtained with a lower purchase value.

Question 3 showcases an aphorism that is sometimes valid: 'it doesn't matter the
price if not the term"; for our case when radically changing the cost of
conservation must recalculate the entire model with a conservation cost of
$55,000, which will give us the following results:
In this phase of this particular problem, we see how with a reduction of the cost of
order, automatically, we can order with a 10% discount given the
negotiation conditions proposed, which would achieve savings by a
an amount exceeding thirty million pesos in relation to the results
obtained in the classical model, if we look at the second discount scale we obtain:

In this case, the second discount scale must be accepted.

Problem 5

The demand for an item from a certain company is 18,000 units per
year and the company can produce that item at a rate of 3,000 units per month, The
the cost of organizing a production batch is $500.00 and the storage cost of
one unit is $0.15 per month. Determine the optimal quantity that should be
to manufacture and the total cost per year assuming that the cost of one unit is $
2.00

= 4,470 Units

The total annual cost is

$40,026

The maximum inventory would be determined by:

=2,235 Units
Problem 6

The demand for a particular item is 18,000 units/year. The cost

The storage cost per unit is $1.20 per year and the ordering cost
a purchase is $400, the lead time (L) is 20 days, the
The cost of one unit is $1. (It is assumed that 1 year = 250 days):

To determine the quantity to order, the following is done:

The interval between orders is:

The daily demand is calculated as follows. Since the demand is of

18,000 per units per year and 1 year = 250 days, then:
Problem 7

Example 7:
The annual demand is D = 1000 units, the economic order quantity is Q = 200 units, the
The desired probability of not experiencing a shortage is P = 0.95, the standard deviation of demand during the
delivery time is 25 units and the delivery time is L = 15 days. Determine the reorder point.
assume that the year has 250 working days.

̅ = 1000 / 250 = 4 units / day

= ̅ + ( ) + Z (25 )
= 415
60 + 1.64 * 25 = 64 + 41
101 units

The inventory policy states that when items drop to 101 units, 200 should be ordered.

Problem 8

The daily demand for a certain product is normally distributed with a mean of 60 and a
deviation of 7 units. The supply source is reliable and maintains a constant lead time of 6 days. The cost
The order placement fee is US $10 and the annual maintenance costs are US $0.50 per unit. No
There are costs of depletion of stock and the unfulfilled orders are supplied as soon as the order arrives.
Assume that there are sales throughout the year. Find the order quantity and the reorder point for
satisfy 95% of customers based on available stock.

Data:
d=60
d=7
D=60*365
Cb$10
Ca=$10
H=0.50
L=6

We calculate Q

2DCe 2*60*365*10
Q* 936 units
Ca 0.50
For the reorder point, we must calculate the amount of products used and add it to the reserve.
security.

L= 6*(7^2)=17.2
Then we need to see how many standard deviations are needed for a specific service level.

(1-p)*Q/σL=(1-0.95)*936/17.2 = 2.721

Interpolating we get from the table E(z)=2.721, z = -2.72; therefore the new reorder point is:

R = d*L + z* L60*6+(-2.72)*(17.2)=313.2 units.

Note that "z* Lis negative, this means that if the order quantity Q has been placed, when the position of
inventory has fallen to the expected demand during the period (dL=369), there would be a higher service level than the
expected. To lower the service level to 95%, it is necessary to create more shortage by ordering a slightly
lower (313).1

Problem 9

A supermarket wants to develop a ordering policy for its inventory that represents a
95% probability of not experiencing shortages. In the case of sheets, the demand is 5,000 per year.
store opens 365 days a year and every 14 days it conducts its inventory and places new orders. The delivery
it takes 10 days. The standard deviation of the demand for sheets is 5 per day and
Currently, there are 150 sheets in stock.

DATA:
D: 5000 sheets per year
365 days a year
ƌ: 14 sheets per day
14 days between reviews
L: 10 days delivery

I: 150 sheets (current inventory)

95% probability of not experiencing shortages

1.-

5√ 24
= 5√ 24
= 5( 5)
= 24

95 15=
1.64 x 24 = 40

2.-
Average demand over the vulnerable period

= 14 14 + 10 )
= 14 24
= 329

3.-
Quantity to request

1See Chase Aquilano page 597.

 q= + - I
40 + 329 - 150
q= 219 units (sheets)
As an inventory policy to ensure a 95% chance of not suffering from stockouts, orders will be placed for
219 units (sheets) for this period between reviews.

Problem 10

A company sends its truck every 30 days to pick up chips from its supplier. The truck takes 2 days to make the trip.
the trip and before leaving gets the order. The chips are consumed at an average rate of 5 per day (with a
standard deviation of 1 per day) for 7 days a week, if currently there are 35 chips in stock and
A service level of 98% is desired. How many chips should be ordered?

= ̅( + )+ + ( + 2.151
= 532 ) √30 + (2 =
) 172.16 ≈ 173 units

CANT. A PEDIR = 173 - 35 = 138 UNITS

Problem 11

DATA
days 50 5,250
average daily demand 5000 year 20 daily
delivery time in days 3 weeks 15 days
Z = standard deviation numbers for 30 boxes
oL = standard deviation of use during the 95%
10
i= 20%
c= 3

Q= 2 10 250 20 = 408 boxes

3 20%

m= L d
m = Ld 15.00 20.00 300
oL = (√L) (Z)
oL = (√L)(Z) 3.87 30.00 116.19
R= m Z oL
R = m + ZoL 300 1.64 116.1895 = 491

The inventory decision policy of the Q system consists of placing a

order of 408 bottles of wine whenever the stock position falls
an average of 50 orders will be placed each year and there will be an average of
five days
Problem 12
11. The daily demand for a product is 60 units with a standard deviation of 10 units. The review period is 10 days.
with a delivery time of 2 days. At the time of review, there are 100 units in stock. If a service probability of
90%, how many units should be ordered?

Problem 13

At Charlie's Pizza, they source pepperoni from Italy; after ordering, it takes 3 weeks to arrive.
arrive, the supplier takes orders every 4 weeks. An average of
150 kg of pepperoni per week with a standard deviation of 30 kg. Given your service of
First, it wants to guarantee a 98% probability of not experiencing a pepperoni shortage. Assume
The supplier's representative has just arrived and there are 500 kg of pepperoni.
refrigerator how many kilos would be requested?

Problem 14