1) Consider a frozen product. Suggest potential adjustments on the simple EOQ model to consider

Modal choice decisions

Volume Transportation Rates

Special handling

Tips: Use examples

2) Emery Pharmaceutical uses an unstable chemical compound that must be kept in an environment where both temperature and humidity can be controlled. Emery uses 800 kg per month of the chemical, estimates the holding cost to be 50% of the purchase price (because of spoilage), estimates order costs to be RM50 per order. Below are the cost schedules of two suppliers.

Vendor 1 Quantity Price/kg 1-499 RM 17.00

500-999 RM 16.75

1000 or more RM 16.50

Vendor 2

1-399 RM 17.10

400-799 RM 16.85

800-1199 RM 16.60

1200- or more RM 16.25

What is the economic order quantity for both suppliers?

What quantity should be ordered and which supplier should be used?

What is the total cost for the most economic order size?

What factor(s) should be considered besides total cost?