MANAGEMENT OF MANUFACTURING SYSTEM
ASSIGNMENT 3
1. A manufacturer requires rivets at an approximately constant rate of 2500 kgs
per year. The cost of rivets is RS 40 per kg. The company's purchase
manager estimates that the carrying cost of inventory 10% per year.
Procurement cost is RS. 200 per order:a. (i). How frequently should orders for rivets be placed and what
quantities should be ordered? Also calculate total cost of inventory.
b. (ii). If the ordering cost is RS 40 per order and 15% is the carrying
cost, how would the optimal policy change? How much is the loss per
years because of imperfect cost information?
2. A hardware store produces and sells hardware items. Following information
is available: Expected annual sales = 8000 units
Ordering cost = RS 180 per order
Holding cost = 10% of average inventory value.
The items can be purchased in the following schedule:
You are required to determine the order size.
3. Explain the various costs associated with inventory?
4. Explain inventory control by ABC analysis?
5. What is back order?
6. Why we say that EOQ model is not very sensitive?