Question
Company A is purchasing two different products. Product X is demanded 200 units per month, and its unit cost is $153.6. Product Y is demanded
Company A is purchasing two different products. Product X is demanded 200 units per month, and its unit cost is $153.6. Product Y is demanded 400 units per month and its unit cost is $34.13. There is an order processing cost of $20 per order and a shipment cost of $60 per shipment. The holding cost rate is 25% for both products. Currently the company's ordering policy is to use EOQ for two products separately. Company A is considering to coordinate the orders of two products, and always order them together in every 2 weeks. This will save from the order processing cost, because in this case it will be incurred only once per order. However, there will still be two separate shipments for two products. What is your advise? How will the ordering costs change? How will the inventory holding costs change?
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