Luyen Ngoc Do Quyen BTFTIU14129

Ngo Khanh Duy BTARIU14601

Pham Gia Huy BTFTIU14132

Phan Thi Bao Nhu BABAWE 15334

CASE 4
1. Plot the annual demand for ZBC bicycles in a chart.

month 2011 2012 Forecast for 2013

Jan 6 7 8
Feb 12 14 15
Mar 24 27 31
Apr 46 53 59
May 75 86 97
June 47 54 60
July 30 34 39
Aug 18 21 24
Sep 13 15 16
Oct 12 13 15
Nov 22 25 28
Dec 38 42 47

Total 343 391 439

 Annual ZBC demands for Airwig Model
120

100

80
Bicycle

2011
60
2012
Forecast for 2013
40

20

0
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

2. What is the probability of monthly demand of 37 bicycles?

Inventory plan:

Average demand per month=439/12=37 bicycles

Order cost=$65/order

Cost per bike= 170*60=$10200

Holding cost=$10200*1%*12 per year per bicycle=$1224 per year/bicycle

Service level=95%

z-value = 1.645

Total demand per year=439 units of bicycle

Normal Distribution:

A normal distribution is only defined by two parameters: its mean and its variance. Since we
assume the forecasts to be unbiased, we assume the mean of the error distribution to be zero,
which does not mean that we are assuming a zero error.
3. Calculate the EOQ for ZBC. What is the time between the orders? How many orders
should ZBC place per year? (15 pts)

Holding cost = 170 x 60% x 12% = $12.24

243965
EOQ is equal to Q*, or EOQ = ( ) 68.28 69
12.24

439
Orders per years are: 6.36 7
69

7
Time between orders: 0.583 30,3
12

4. Calculate the ROP and total inventory costs. (15 pts)

At 95% level of service, we have Z = 1.65

439
Average demand per month = 36.583
12

Standard deviation of the demand = 25.67

ROP = 36.583 + (1.65)*(25.67) 78.938579 units

Total inventory cost = holding cost + ordering cost = 12.24 + 65 = 77.24

5. If the lead time for shipping bicycles from China is 2 months, what is the ROP? (10
pts)

At 95% level of service, we have Z = 1.65

 439
Average demand per month = 36.583
12

Standard deviation of the demand = 25.67

ROP = 36.583*2 + (1.65)*(25.67) 115.52116 units

6. Prepare a monthly requirement plan for bicycles for 2013 using EOQ policy
(including projected on-hand inventory, net requirement, order receipts and order
releases) (20 pts)

Q*, or EOQ = 69 Place an order of 69 units

Months
1 2 3 4 5 6 7 8 9 10 11 12
Gross requirement 8 15 31 59 97 60 39 24 16 15 28 47
On hand: 7 14 27 53 86 54 34 21 15 13 25 42
Net requirement 1 1 4 6 11 6 5 3 1 2 3 5
Order receipt 69 69 69 69 69 69
Order release 69 69 69 69 69 69

7. Discuss the trade-off between holding costs and lost profit (stockout cost) when
selecting an inventory policy.

Holding high levels of inventory (overstock) result in higher inventory carrying costs and
low (or no) stockout costs. Alternatively, holding low levels of inventory result in low
inventory carrying costs and some (high) stockout costs.

Fixed-time period model has a larger average inventory because it must also protect
against stockout during the review period, T; the fixed-order quantity model has no
review period.

The fixed-order quantity model is a perpetual system, which requires that every time a
withdrawal from inventory or an addition to inventory is made, records must be
updated to reflect whether the reorder point has been reached.