MGMT 420 ABC Analysis, EOQ, Reorder Point & Safety Stock

Module 5ABC Analysis, EOQ, Reorder Point & Safety Stock

Problems

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Scenario

You have been tasked to manage the inventory at your company. Your boss thinks that the inventory management is out of control, but he is not sure and wants you to perform some analysis of the inventory and provide him with some data. This chart lists your current stock, annual volumes, and unit cost.

Item Stock Number Annual Volume Unit Cost
13595 9500 $ 2
32514 9000 $10
22010 3800 $650
14851 2400 $330
15242 1800 $500
65248 1400 $90
10252 110 $3,800
23256 1100 $480
16325 950 $920
12564 495 $190
13584 400 $250
12547 190 $220

Complete the steps in each section and then submit your assignment for grading.

Expand AllPanels Collapse AllPanels

Step 1: Conduct an ABC Analysis

Use Excel or Excel OM and the chart to conduct an ABC analysis to determine which category each of the parts falls into. Provide an analysis and interpretation of the results.

Step 2: Calculate EOQ and Reorder Point

Use Excel or Excel OM to calculate the EOQ and the reorder point for part number 13595 (check reorder point and graph when setting up the software).

The lead time to reorder parts is 30 days. The set up/ordering cost is $1,000 per order, and the holding cost is fixed at $125 per month. The factory runs 365 days per year, and the company wants to maintain a safety stock of 5.

Provide an analysis and interpretation of the results.

Step 3: Calculate Safety Stock

In Step 2, you were given the safety stock of 5; however, this can be calculated for a more accurate number. Assume that the average daily demand for part number 13595 is 26 with a standard deviation of 2 parts per day. If the company wants to make sure that they do not stockout more than 5% of the time, then what level of safety stock should they hold?

To calculate the safety stock, use Excel or Excel OM and the Safety Stock (Normal Distribution) spreadsheet. Input your data into column H of the model titled Model: Daily Demand and its standard deviation given.

Step 4: Submit the Assignment

Submit your spreadsheet. Save your assignment using a naming convention that includes your first and last name and the activity number (or description). Do not add punctuation or special characters.

Review the Problems Rubric for detailed grading information.

 

Rubric

MGMT 420 5.2 Problems Rubric

MGMT 420 5.2 Problems Rubric
Criteria Ratings Pts
This criterion is linked to a Learning OutcomeAnswers to Questions/Problems
70.0 to >65.0 pts

Excellent – A

Answers to questions/problems are correct throughout.

65.0 to >60.0 pts

Above Average – B

Minor errors in answers to several questions/problems.

60.0 to >55.0 pts

Average – C

Many minor or a few major errors.

55.0 to >50.0 pts

Near Failing – D

Many minor and major errors.

50.0 to >0 pts

Failing – F

Mostly incorrect errors.

70.0 pts
This criterion is linked to a Learning OutcomeStrategy Choice and Justification
20.0 to >16.0 pts

Excellent – A

Correct and thorough analysis and interpretation of results.

16.0 to >13.0 pts

Above Average – B

Correct but not thorough analysis and interpretation of results.

13.0 to >10.0 pts

Average – C

Somewhat correct and thorough analysis and interpretation of results.

10.0 to >7.0 pts

Near Failing – D

Weak or somewhat incorrect analysis and interpretation of results.

7.0 to >0 pts

Failing – F

Mostly incorrect and weak or missing analysis and interpretation of results.

20.0 pts
This criterion is linked to a Learning OutcomePresentation of results
10.0 to >8.0 pts

Excellent – A

Solution is presented in a clear, orderly, and professional manner.

8.0 to >6.0 pts

Above Average – B

Solution is presented in a mostly clear, orderly manner, and professional manner.

6.0 to >4.0 pts

Average – C

Solution is presented in a somewhat clear and orderly manner.

4.0 to >2.0 pts

Near Failing – D

Solution is presented in a mostly unclear and orderly manner.

2.0 to >0 pts

Failing – F

Solution is presented in an unclear and orderly manner.

10.0 pts
Total Points: 100.0

 

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