Assume a firm seeks to minimize its total inventory costs of ordering widgets that it needs for its production process. The firm estimates that it costs $6/widget/year to hold widgets in inventory. It also faces ordering charges of $25/order, regardless of the order size. The firm needs 30,000 widgets per year for its operations. What is the Economic Order Size for this firm? What is its total inventory costs?

Assume a firm seeks to minimize its total inventory costs of ordering widgets that it needs for its production process. The firm estimates that it costs $6/widget/year to hold widgets in inventory. It also faces ordering charges of $25/order, regardless of the order size. The firm needs 30,000 widgets per year for its operations. What is the Economic Order Size for this firm? What is its total inventory costs?

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.
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