Globe Industries manufactures a product used in the Telecom industry. Ted Dawson, the companys purchasing manager, is currently revising the inventory ordering policy for PF23, one of the chemicals used in the production process. The chemical is purchased in 10-kilogram cases for $78 each and the firm uses 4 800 cases per year. The accountant of the company has shared the following details with Ted:

Estimated incremental costs of ordering and receiving PF23 are $150 per order The annual cost of storing PF23 is $4 per case currently, the order size is 320 units The lead time required to receive an order of PF23 is one month. Required:

What is the total annual cost of ordering and storing PF23 under the current policy? (1 mark) Use the EOQ formula to determine the optimal order quantity for PF23. (0.5 marks) How many orders will be placed per year based on the EOQ? (0.5 marks) If Ted decides to order as per EOQ, how much the company will save in inventory cost per year? Support your answer with calculations. (2 marks) Assuming stable usage of PF23 each month, determine the reorder point for PF23. (0.5 marks) Suppose that monthly usage of PF23 fluctuates between 300 and 500 cases, although annual demand remains constant at 4 800 cases. What level of safety stock should the materials and parts manager keep on hand for PF23? What is the new reorder point for the chemical? (1.5 marks) Suppose Ted wants to introduce a contemporary inventory policy - Just in Time. What are the steps Ted must take to implement the new policy? Explain what obstacles he may face during the transition period and how to manage these obstacles? (4 marks)