The usage of Male Cord End (#4867), purchased from EE COL Electric Ltd, by Sterling Pulp Chemicals (ERCO) during the June to October period of 1998 was 5, 1, 5, 9, and 8. Using Exponential Smoothing with a = .5, the forecast usage for November is 7.25 units, and the standard deviation of monthly usage, using the above numbers, is 3.13 units. The price of one unit is $2.48. Suppose Sterling uses 20 percent as its holding cost rate per year, purchase lead time is approximately 14 days, and desired lead time service level is 95 percent. Assume 30 days in a month.
a. If this item is ordered individually using the EOQ/ROP model, and ordering cost is $1 per order, calculate the EOQ and ROP for it.
b. Suppose Sterling orders the Eagle Male Cord Ends jointly with other SKUs supplied by EECOL Electric. For simplicity, assume that there is only one other SKU, item #14-20-390, Eagle Female Cord End. The forecast for usage of Eagle Female Cord End for November is 2.23 units. The price of a female cord end is $5.06. The ordering cost per purchase order for one SKU is $3 and for another line item $.50.
i. Calculate the optimal order interval.
ii If currently there are 13 units of Male Cord End on hand, how many should be ordered now?