Athens Inc. are using a purchased component in their own assembly. The production runs 52 weeks/year and the consumption of the component is evenly distributed over the year. The purchase price is $23. The inventory carrying cost is 20%. The administrative cost for each purchase is $85. The component can only be purchased in regular tens (i.e. 10, 20, 30, 40 et c).
The demand is as follows:
| Week | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Demand (pieces) | 19 | 24 | 21 | 18 | 23 | 14 | 31 | 19 | 21 | 20 | 21 | 21 |
1a. Athens Inc. want to calculate the Economic Order Quantity. How much shall they order each time, assume that the 12 weeks of demand above is representative for the full year.
Calculate the Economic Order Quantity (EOQ).
1b. Athens Inc. are using their ERP systems material planning function for determining when orders to the supplier of the component shall be released. Assume that the safety stock level is 20 pieces and there are 100 pieces available in stock when production in week 1 starts. The lead time is 2 weeks from the supplier of the component.
In which week should the first order to the supplier of the component be released?
