Congratulations! You have been hired by a new fast-food company "Basta! Pasta" offering fresh pasta to-go in 10 cities. As an operations manager, you will have to create a robust customer service process by analyzing the operations and process flows, optimizing them, improving inventory and supply chain management that is expected to result in an increase in the company's performance. At the end of your trial period, you will have to present the result of your work in front of the Board members.

Description:

"Basta! Pasta" uses 400 packages of spaghetti (5 kg each) every month, and demand is steady throughout the year. "Basta! Pasta" signed a contract to purchase the spaghetti from a U.S. distributor for a price of $6 per package and $100 fixed cost for every delivery independent of the order size. "Basta! Pasta" incurs an inventory holding cost of 25 percent per year. At the moment, "Basta! Pasta" orders 1.000 packages of spaghetti at a time.

1.1) How many orders does "Basta! Pasta" place per year?

400 orders per month * 12 months / year = 4800 orders

1.2) What is "Basta! Pasta's" annual inventory holding cost per package?

0.25 * 6 per package = $1.5

1.3) What is "Basta! Pasta's" annual holding cost if it orders 1,000 packages at a time?

$1.5 per package * 1,000 packages = $1500

1.4) What is "Basta! Pasta's" sum of ordering and holding costs per year if it orders 1,000 bags with each order?

4800 orders / 1000 packages = 4.8

5 orders

$100 fixed cost / order * 5 orders = $500 cost

Annual Ordering cost + holding cost = $500 + $1500

= $2000 sum of ordering and holding costs per year

I have solved 1.1-1.4 above, but need help with the three problems below

1.5) What order quantity minimizes Basta! Pastas ordering and holding costs per year?

1.6) An Italian producer offered Basta! Pasta a deal. Basta! Pasta can buy a years worth of spaghetti directly from Italy for $4 per package and a fixed cost for delivery of $1,000. If Basta! Pasta takes this deal, what would be the sum of its purchasing, ordering and holding costs per year? Should Basta! Pasta accept this offer or continue following the current practice (ordering 1,000 packages at a time)?

2) Identify at least three ways that Basta! Pasta can reduce its inventory holding costs.