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practice_11 - Practice #11 Inventory Management BUAD311...

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Practice #11 Inventory Management BUAD311 – Operations Management Spring 2011 1. SY Manufacturers (SYM) is producing T-shirts in 3 colors: red, blue and white. The monthly demand for each color is 3000 units. Each shirt requires 0.5 pounds of raw cot- ton that is imported from the Luft-Geshfet-Textile (LGT) Company in Brazil. The pur- chasing price per pound is $2.5 (paid only when the cotton arrives to the SYM’s facilit- ies) and transportation cost by sea is $0.20 per pound. The traveling time from LGT’s fa- cility in Brazil to the SYM facility in the USA is 2 weeks. The cost of placing a cotton order, by SYM, is $100 and the annual interest rate that SYM is facing is 20%. a. What is optimal order quantity of cotton? b. How frequent should the company order cotton? c. Assuming that the first order is needed in 04/01/2007 when should SYM place the order? d. How many orders will SYM place during the year (04/01/2007-03/31/2008) e. What is the resulting annual holding cost? . f. What is the resulting annual ordering cost? g. If the annual interest cost is only 5% how will it affect the annual number of or- ders, the optimal batch size and the average inventory (You are not expected to provide a numerical answer to this question. Just describe the direction of the change, explain your answer) 1
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2. Demand for a book at Amazon.com is 250 units per week.
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practice_11 - Practice #11 Inventory Management BUAD311...

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