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Parts Emporium

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Management
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University of Phoenix
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Parts Emporium Inventory Management your name University name Supply chain Inventories of two products, EG151 Exhaust Gaskets and DB032 Drive belt are assessed. Figure 1. Supply Chain of Parts Emporium Supply chain issues • Bloated inventories • High holding costs - 324 belts of inventory on-hand • Disarranged inventory resulting in sales loss due to missing stock • Inadequate/inaccurate information on inventory turns • Possibility of no safety stock resulting in stock outs – 11 gaskets are backordered • Inadequate customer service • Frequent back orders result in loss of reputation • Sales lost to competition Proposed method • Use a continuous review Q system • Determine Economic Order Quantity (EOQ) = 2×𝐷𝑒𝑚𝑎𝑛𝑑×𝑂𝑟𝑑𝑒𝑟𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 • Determine Cycle Service level: 95% is considered appropriate • Determine Reorder Point (R) = Average demand during lead time + Safety stock Average demand during lead time = Average demand per week x Constant lead time (weeks) EOQ : EG151 Exhaust Gasket Key inputs in determining the Economic Order Quantity: Weekly average demand = 102 units Annual demand = 102 x 52 weeks per year = 5,304 units Inventory investment = $12.99 x (100 – 32)% Holding cost = 21% of $12.99 x (100 – 32)% = $1.85 per unit per year 𝑬𝑶𝑸 = 𝟐 × 𝟓, 𝟑𝟎𝟒 × 𝟐𝟎 = 𝟑𝟑𝟗 𝒖𝒏𝒊𝒕? ...
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