Part of the data required to determine the appropriate order quantity for a part is "H", the estimated cost of holding one unit of inventory for one year.

1. Explain why some items of inventory may have a very large "H" value while others may have a relatively small "H" value. What factors could contribute to those differences?
2. Suppose we are told by our accounting department that the "H" values of most of our inventory items will be increasing substantially due to rising warehousing costs across the board. As an inventory manager, what does this mean for your strategy about how you manage your various parts? Based on what you know about the EOQ and ROP model, what changes should you be making to your strategy about how you manage your parts? Explain