Operations Management Tools and Method

750 – 1000 Words

APA format w/in text citations.

As the production manager, you need to minimize both ordering and inventory costs. You need to provide a recommendation of the optimal order quantity of raw materials to your plant manager. Your objective is to determine the economic order quantity (EOQ). If the annual demand for Ultamyacin at Smitheford is 400,000 units, then the annual carrying cost rate is 15% of the cost of the unit. The product costs $48/unit to purchase, and the product ordering cost is $28.00.

In your report, discuss information based on the following questions:

What is the basic EOQ?
What is the TC (total cost) at the EOQ?
How much would the TC increase if the order quantity must be 1,000 units?
How is JIT (just-in-time) ordering methodology different from EOQ methodology?

Show all your calculations.

Answer Preview…………….

One of the primary approaches through which a business could increase the gains from the business has always been through an ideal approach to management of the costs incurred. In particular, Smitherford has a significant opportunity for a successful cost minimization approach by analyzing the production levels to determine the most optimal production amount. Given the cost function, the ideal production level lies at the most minimal point of the cost function. The annual demand, order, and carrying costs incurred all sum up to the order function, which would……………
APA 877 words