Discount-Mart (see Problem 16.8), as part of its new Lean program, has signed a long-term contract with Specialty Lighting and will place orders electronically for its halogen lamps. Ordering costs will drop to $.50 per order, but Discount-Mart also reassessed its carrying costs and raised them to $20 per lamp.

a) What is the new economic order quantity?

b) How many orders will now be placed?

c) What is the total annual cost of managing the inventory with this policy?

Problem 16.8

Discount-Mart, a major East Coast retailer, wants to determine the economic order quantity (see Chapter 12 for EOQ formulas) for its halogen lamps. It currently buys all halogen lamps from Specialty Lighting Manufacturers in Atlanta. Annual demand is 2,000 lamps, ordering cost per order is $30, and annual carrying cost per lamp is $12.

a) What is the EOQ?

b) What are the total annual costs of holding and ordering (managing) this inventory?

c) How many orders should Discount-Mart place with Specialty Lighting per year?

A certain product has the following bill of materials. This applies to the following questions 1-5. Note that the number in parentheses refers to the number of respective items needed in the assembly process.

The master production schedule for A for the next 6 weeks is shown below.

Weeks	11	12	13	14	15	16
Master production schedule	23	24	21	30	23	29

Use the above information to do your analysis in the next 5 questions.

1. What would be the gross requirements of B and C, respectively, for weeks 11-16?

Now, Assume

• Item B’s projected on-hand at the beginning of week 11 (i.e., at the end of week 10) was 69 and we were scheduled to receive 50 on week 12,
• The gross requirements on weeks 11-16 were as found in the information for this assignment.

Use the above information to do your analysis in the next question.

2. What would be the projected on-hand at the end of week 12? Show all your calculations.

Now assume:

• Item C’s projected on-hand at the end of week 13 was 7
• No scheduled receipt on week 14,
• Gross requirements were as found in problem 1
• The lot-sizing rule was POQ=2 weeks

Use the above information to do your analysis in the next question.

3. What should be the planned receipt on week 14? What would be the projected on-hand at the end of week 14? Show all your calculations.

Now assume: the lot-sizing rule was FOQ=200.

Use the above information to do your analysis in the next question.

4. How would the answers in problem 3 (planned receipt and projected on-hand at the end of week 14) change? Show all your calculations.

Finally, assume that the planned releases of item C were as follows:

Weeks	11	12	13	14	15	16
Master production schedule		130		210	190

Use the above information to do your analysis in the next question.

5. What would be the gross requirements of item E in weeks 11-16?