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    Inventory management problems

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    "Jill's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year. Tegdiws are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. Widgets are ordered from a supplier who stops by every three weeks. Data for both products are as follows:"

    See attached file for data.

    a. What is the inventory control system for Tegdiws? That is, what is the reorder quantity and what is the reorder point?
    b. What is the inventory control system for Widgets?

    "Item X is a standard item stocked in a company's inventory of component parts. Each year the fi rm, on a random basis, uses about 2,000 of item X, which costs $25 each. Storage costs, which include insurance and cost of capital, amount to $5 per unit of average inventory. Every time an order is placed for more of item X, it costs $10."

    a. Whenever item X is ordered, what should the order size be?
    b. What is the annual cost for ordering item X?
    c. What is the annual cost for storing item X?

    "In the past, Taylor Industries has used a fixed-time period inventory system that involved taking a complete inventory count of all items each month. However, increasing labor costs are forcing Taylor Industries to examine alternative ways to reduce the amount of labor involved in inventory stockrooms, yet without increasing other costs, such as shortage costs. Here is a random sample of 20 of Taylor's items."

    1. What would you recommend Taylor do to cut back its labor cost? (Illustrate using an ABC plan.)"
    2. Item 15 is critical to continued operations. How would you recommend it be classified?

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    Solution Summary

    This solution provides a guide for three inventory management problems.