The above case study states that 43% of small businesses are either not tracking inventory or using manual processes, such as spreadsheets or pen-and-paper. This creates a higher probability of creating double entries, difficulties in placing and receiving orders, and time-consuming processes of locating stock, among other errors.

Suppose you are appointed as a purchasing officer of a small business. You are asked to manage the purchases of NIDO (powder milk). The annual demand = 1500 units of NIDO, Delivered purchase cost = R25/units, Annual carrying cost percentage= 15percent, Order cost = R35/order. The lead time is 10 working days. Assuming 20 working days per month.

2.1 Determine the Economic Order Quantity (4 marks)

2.2 Determine the reorder point (4 marks)

2.3 Determine the average inventory (4 marks) Suppose orders are placed only at review time. Find the optimal period and the optimal order quantity.