The company is located in Tacoma, Washington. One of the most critical components of the engine is the exhaust manifold. The company purchases this item from the best manufacturers in the world. TJ is the buyer in charge of managing this item.

TJ$\text{'}$s purchasing agent currently submits an order release for this item every $2$ weeks. The company's annual demand is $550$ units $(2$ units per working day$).$ Nordlund's relatively low volume and quality focus, rather than volume focus, means the company cannot take advantage of quantity discounts. The supplier has agreed to deliver this item within $1$ week following the order$$s delivery. For this reason, Nordlund has never had a shortage of exhaust manifolds. The total time between the release date and the date of receipt is $1$ week or $5$ working days.

Accounting has generated the following inventory$-$related costs. The procurement costs amount to $$300$ per order, including labor, transportation, receiving, inspection, and moving costs. The holding cost is $$120$ per item per year, considering storage, damage, insurance, taxes, etc.

With the added emphasis on efficiencies in the supply chain, the company president has asked TJ to evaluate the exhaust manifolds' purchase seriously. An area to be closely scrutinized for possible cost savings is inventory procurement.

DISCUSSION QUESTIONS

What is the optimal order quantity of exhaust manifolds that should be placed in each order?

What is the reorder point of the exhaust manifold $($ROP$)?$

What cost savings will Nordlund realize if it implements an order plan based on EOQ?