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    The document is a solution to an operations research problem posed by TT Beverage Co. regarding inventory costs of their #1 selling beer, Sergio Beer. The key results are: 1) The economic order quantity (EOQ) is calculated to be 1824 cases 2) The reorder point is calculated to be 800 cases 3) Orders will be placed every 4.6 working days (57 times per year) 4) The minimum total annual inventory cost is calculated to be approximately 3648 MU

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    Or Assignment 2010b51

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    smas_arif4310
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    The document is a solution to an operations research problem posed by TT Beverage Co. regarding inventory costs of their #1 selling beer, Sergio Beer. The key results are: 1) The economic order quantity (EOQ) is calculated to be 1824 cases 2) The reorder point is calculated to be 800 cases 3) Orders will be placed every 4.6 working days (57 times per year) 4) The minimum total annual inventory cost is calculated to be approximately 3648 MU

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    The document is a solution to an operations research problem posed by TT Beverage Co. regarding inventory costs of their #1 selling beer, Sergio Beer. The key results are: 1) The economic order quantity (EOQ) is calculated to be 1824 cases 2) The reorder point is calculated to be 800 cases 3) Orders will be placed every 4.6 working days (57 times per year) 4) The minimum total annual inventory cost is calculated to be approximately 3648 MU

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    36 views3 pages

    Or Assignment 2010b51

    Uploaded by

    smas_arif4310
    The document is a solution to an operations research problem posed by TT Beverage Co. regarding inventory costs of their #1 selling beer, Sergio Beer. The key results are: 1) The economic order quantity (EOQ) is calculated to be 1824 cases 2) The reorder point is calculated to be 800 cases 3) Orders will be placed every 4.6 working days (57 times per year) 4) The minimum total annual inventory cost is calculated to be approximately 3648 MU

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    Download as DOCX, PDF, TXT or read online from Scribd
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    of 3

    SUBMITTED BY: SUBMITTED TO:

    SHEIKH MOHD ARIF SHAFI Prof. GIRISH PHATAK


    2010B51

    OPERATION RESEARCH PENALTY ASSIGNMENT


    QUESTION: TT Beverage Co. is a distributor of beer, wine and soft drinks product.
    From a main warehouse located in Magusa, TRNC, TT supplies nearly 1000 retail
    stores with beverage products. The beer inventory, which constitutes about 40%
    of the company’s total inventory, averages approximately 50 000 cases. With an
    average cost per case of approximately 8MU, TT estimates the value of its beer
    inventory to be 400 000 MU.

    The warehouse manager has decided to do a detailed study of inventory costs


    associated with Sergio Beer, the # 1 selling TT beer. The purpose of the study is to
    establish the “how-much to order,” and “when to order” decisions for Segio Beer
    that will result in the lowest possible cost.

    The manager found that the demand is constant and 2 000 cases/week. The cost
    of holding for the TT beer inventory is 25% of the value of the inventory.

    (Note that definding the holding cost as a % of the value of the product is
    convenient, because it is easily transferable to other products)

    TT is paying 32 MU/order regardless of the quantity requested in the order.


    Suppose TT is open 5 days each week, and the manufacturer of Sergio Beer
    guarantees 2-day delivery on any order placed.
    a) Find Economic Order Quantity.

    b) Find reorder point.

    c) How frequently the order will be placed?

    d) Find the cycle time?

    e) Calculate minimum total inventory cost.

    Solution:

    a) Find EOQ

    2CB 2 ( 2000×52 )( 32 )
    X 0=
    √ √Zp
    =
    0 .25×8
    =1824 cases

    The use of an order quantity of 1824 cases will yield the minimum-cost inventory policy for TT
    beer.

    b) Find the reorder point


    R0 =c⋅t Lt
    2000
    c= =400
    5
    R0 =400 units×2 days=800 cases

    c) How frequently the order will be placed?


    C 104000
    N= = =57 order / year
    X 1824

    d) Find the cycle time.


    1 1
    T = = ×260=4 .6 days
    N 57

    The cycle time is 4.6 working days.


    e) Calculate minimum total inventory cost.
    K e= √2 CBEZp=√2 ( 104000 ) ( 32 )( 0 . 25 ) ( 8 )
    K e= √13312000≃3648 MU 1824 Total order cost ( 57×32 )
    1824
    1824 Total holding cost ( ⋅2≃1824 )
    2

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