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Question 4. Mark joins a Accelerate Inc. a company dealing with organic foods in the region. Over the years this company has used the traditional
Question 4. Mark joins a Accelerate Inc. a company dealing with organic foods in the region. Over the years this company has used the traditional EOQ model to order organic foods from suppliers. Currently this company is facing a new crisis; there is a lot of inventory that depreciates very quickly. Mark's first mandate is to help ensure that this company does not loose revenue in depreciated inventory. a) Based on inventory management concepts what is the first thing that Mark should focus on to help minimize the depreciated inventory (2point) b) One of the main organic products in inventory is milk. The following table presents the different holding and order costs from different suppliers. Which supplier should mark select and why. Present your calculations with appropriate computations (Assume the annual demand for milk is 30,000 bottles. The last year the company lost $90,000 in revenues in milk alone) Supplier Holding Cost Order/Setup per unit Cost 9 Current 29 4 Supplier Supplier A Supplier B 9.25 27 4 10.5 18 4 11 12 Supplier C 15 10 Supplier D IT Mark is also entrusted to maintain a service level of 98% and assume that the company operates for 300 days in the year. At what point in inventory level should Mark order new stocks for your chosen supplier? (Assume that the standard deviation is 10 bottles per day and each of the suppliers have a lead time of 5 working days)
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