In preparing the MRP example, Phil planned to use the worksheets shown on the next page and to make the following assumptions:

Seventeen gear boxes are on$-$hand at the beginning of week $1,$ and five gear boxes are currently on order to be delivered at the start of week $2.$

Forty input shafts are on$-$hand at the start of week $1,$ and $22$ are scheduled for delivery at the beginning of week $2.$

page $638$

Assignment

Initially, assume that Phil wants to minimize his inventory requirements. Assume that each order will be only for what is required for a single period. Using the following forms, calculate the net requirements and planned order releases for the gear boxes and input shafts. Assume that lot sizing is done using lot$-$for$-$lot.

Phil would like to consider the costs that his accountants are currently using for inventory carrying and setup for the gear boxes and input shafts. These costs are as follows:

Part

Cost

Gear Box

Setup $=$ $$90/$order

$$

Inventory carrying cost $=$ $$2/$unit$/$week

Input Shaft

Setup $=$ $$45/$order

$$

Inventory carrying cost $=$ $$1/$unit$/$week

Given the cost structure, evaluate the cost of the schedule from $(1).$ Assume inventory is valued at the end of each week.

Find a better schedule by reducing the number of orders and carrying some inventory. What are the cost savings with this new schedule?