+ E A9 Read aloud | Draw constant price or cost that is independent of the order quantity (1.e., no quantity discount). No inventory in transit. One item of inventory or no interaction between items. Infinite planning horizon Unlimited capital "But we should just use the original Harris-Wilson Model and consider tweaking it later. As I recall, the basic formula is: 20s R with a total annual cost calculated as At the end of the meeting, Martin agreed to take the proposals and summarize them in the following chart Quantity per Order (units) Number of Cases (2 decimals) Orders per Year Annual Ordering Cost Annual Carrying Cost Annual Total Cost Ferguson Proposal Powell Proposal EOQ EOQ full cases EOQ after RPA changes QUESTIONS 01 What is the total cost difference between Ferguson's proposal to order 4 cases each time and Powell's proposal to order 32 cases each time? Explain your results 02. Lewin suggested looking at economic order quantity (ECO) nsed on the lowest total annual cost what order quantity should Martin recommend? What is the resulting total cost when using the EOD (do not include the unit purchase of what in the cost difference compared to the Ferguson and the Powell proposals? Explain your rets + B A Read aloud Draw Compartmental Manufacturing Corporation Case provided by the Council of Supply Chain Management Professionals Located Vigginia CMG is a regional provider of grain towers/silos for farms as far Statesboro, Georgia. In recent years CMC has extended their business to include the latest in agricultural engineering services for elevator design and installation. Their core business still remains the fabrication of the grain elevators. Vice President of Manufacturing Ferris Martin stopped by the office of CMC's President Robert Lewin and remarked, "I need your help resolving an issue between our Financial Comptroller, Fred Ferguson, and our Purchasing Director, Peter Powell. These two executives continue to argue with each other about our ordering policies." "How can I help? asked Lewin, peering over his glasses "Both Fred and Peter are pretty strong-willed and protective of their areas?" "It boils down to conflicting goals," replied Martin "Ferguson says the cost to carry inventory is 32% and is trying to keep inventory costs low. Powell had his intern identify his ordering costs and was shocked to find that every time our employees place an order it costs us $48 regardless of the quantity ordered. Each one would like to dictate how the other operates so they can achieve their own performance goals. I'd like to have them meet somewhere in the middle but I'm not sure if that is the best solution. *CMC's primary performance goals are to reduce cost and increase profitability exclaimed Lewin, *These guys need to understand CMC comes first offer them a fost case to propose and defend their ordering policy and we'll sort this out." "I suggest part number 64-1909?" replied Martin The unit cost is $112.00 and we order 10,752 units per 365 day year. While we do not have to order by the case, it does come in 15 units por case. The average lead time from when we place the order to the time we receive it at our dock is 8.2 days with a standard variation of 1.7 days Later that work in the conference room Pergusion and Powell each offered proposals for ordering part number 64-1909. Purchasing Director Powoli oted he was trying to keep his purchasing costs down by ordering in larger quantities and suggested buying 32 cases at a time. He has also indicated he would like to avoid ordering in cases since doing so may result in shipments of incorrec quantities and consequenching cots Controller Forguson cartied the most important inue was the cost to carry inventory under for ordering cases at a time to keep average inventories low. Seeking a compromise wasted uning economic ordo quantity ( EQ) O + E A9 Read aloud | Draw constant price or cost that is independent of the order quantity (1.e., no quantity discount). No inventory in transit. One item of inventory or no interaction between items. Infinite planning horizon Unlimited capital "But we should just use the original Harris-Wilson Model and consider tweaking it later. As I recall, the basic formula is: 20s R with a total annual cost calculated as At the end of the meeting, Martin agreed to take the proposals and summarize them in the following chart Quantity per Order (units) Number of Cases (2 decimals) Orders per Year Annual Ordering Cost Annual Carrying Cost Annual Total Cost Ferguson Proposal Powell Proposal EOQ EOQ full cases EOQ after RPA changes QUESTIONS 01 What is the total cost difference between Ferguson's proposal to order 4 cases each time and Powell's proposal to order 32 cases each time? Explain your results 02. Lewin suggested looking at economic order quantity (ECO) nsed on the lowest total annual cost what order quantity should Martin recommend? What is the resulting total cost when using the EOD (do not include the unit purchase of what in the cost difference compared to the Ferguson and the Powell proposals? Explain your rets + B A Read aloud Draw Compartmental Manufacturing Corporation Case provided by the Council of Supply Chain Management Professionals Located Vigginia CMG is a regional provider of grain towers/silos for farms as far Statesboro, Georgia. In recent years CMC has extended their business to include the latest in agricultural engineering services for elevator design and installation. Their core business still remains the fabrication of the grain elevators. Vice President of Manufacturing Ferris Martin stopped by the office of CMC's President Robert Lewin and remarked, "I need your help resolving an issue between our Financial Comptroller, Fred Ferguson, and our Purchasing Director, Peter Powell. These two executives continue to argue with each other about our ordering policies." "How can I help? asked Lewin, peering over his glasses "Both Fred and Peter are pretty strong-willed and protective of their areas?" "It boils down to conflicting goals," replied Martin "Ferguson says the cost to carry inventory is 32% and is trying to keep inventory costs low. Powell had his intern identify his ordering costs and was shocked to find that every time our employees place an order it costs us $48 regardless of the quantity ordered. Each one would like to dictate how the other operates so they can achieve their own performance goals. I'd like to have them meet somewhere in the middle but I'm not sure if that is the best solution. *CMC's primary performance goals are to reduce cost and increase profitability exclaimed Lewin, *These guys need to understand CMC comes first offer them a fost case to propose and defend their ordering policy and we'll sort this out." "I suggest part number 64-1909?" replied Martin The unit cost is $112.00 and we order 10,752 units per 365 day year. While we do not have to order by the case, it does come in 15 units por case. The average lead time from when we place the order to the time we receive it at our dock is 8.2 days with a standard variation of 1.7 days Later that work in the conference room Pergusion and Powell each offered proposals for ordering part number 64-1909. Purchasing Director Powoli oted he was trying to keep his purchasing costs down by ordering in larger quantities and suggested buying 32 cases at a time. He has also indicated he would like to avoid ordering in cases since doing so may result in shipments of incorrec quantities and consequenching cots Controller Forguson cartied the most important inue was the cost to carry inventory under for ordering cases at a time to keep average inventories low. Seeking a compromise wasted uning economic ordo quantity ( EQ) O