Smart Products
Assume a 365 day year.

Smart Products buys 300,000 units of a crucial input per year from a supplier that fulfills its orders within two days of receiving them. Smart Products submits its orders directly to the supplier through a web interface, so its lead time is the supplier’s two day turnaround time. Each order costs Smart Products about $500 to place, while carrying costs are about $60 per unit per year. The company seeks to maintain a five day usage level in a safety stock.

-What is Smart Product's economic order quantity (EOQ)for this input?

Question

Smart Products
Assume a 365 day year.

Smart Products buys 300,000 units of a crucial input per year from a supplier that fulfills its orders within two days of receiving them. Smart Products submits its orders directly to the supplier through a web interface, so its lead time is the supplier’s two day turnaround time. Each order costs Smart Products about $500 to place, while carrying costs are about $60 per unit per year. The company seeks to maintain a five day usage level in a safety stock.

-What is Smart Product's economic order quantity (EOQ)for this input?

Quizplus · Accepted Answer

EOQ = sqrt((2*300,000*500)/(60*365)) = 2236 units

Smart Products Assume a 365 Day Year