Photo-Max, a large photographic outlet, receives 5,000 collapsible tripods annually from Quality Photographic Suppliers to meet annual demand. The ordering cost is $15 per order, and the carrying cost is $0.50 per unit per year. Quality Photographic, building on its established reputation for on-time delivery, is interested in smoothing its own production processes and has initiated a new option for its customers. When an order is placed, Quality Photographic will ship one-third of the order every week for three weeks instead of shipping the entire order at one time. Weekly demand for Photo-Max over the lead time is 100 tripods.
a. Determine the order quantity and total cost for Photo-Max for each option and provide a recommendation.
b. Photo-Max has requested that the option to expand the delivery schedule be extended to five weeks of equal quantities believing that this would reduce total cost. Determine if this assumption is true.
The solution contains optimal order quantity calculation to minimize ordering and inventory carrying cost.