Excel Toys, a manufacturer of plastic toys for children, requires constant supply of high-density polyethylene (HDPE) in the resin form. HDPE is available in the resin form and one tonne costs approximately ?2,000. The manufacturer runs his factory for 250 days a year and the daily consumption rate for HDPE is four tonnes. The suppliers normally take a week to replenish an order. The ordering cost is ?2,000 per order and the carrying cost is 20 per cent.

Estimate the cyclic and pipeline inventory in the system at Excel Toys. What is the total cost of the plan?

Suppose if the supplier insists on a minimum order quantity of 75 tonnes, what is your recommendation to Excel? Will the recommendation change if the minimum order quantity is 150 tonnes?