Case Report: Jamie Chang Essay

1. Based on the assumption that all data collected be accurate and the methods used to collect are reliable, the EOQ calculations are correct. Given by the EOQ model, the best Q (quantity of an order) is set by the equation Oopt=2(Demand Rate)(Order Setup Cost)/(Holding Cost Rate)(1/2). In this case, order setup hail=setup hours per order setup follow per hour holding bell rate= 30% product unit of measurement speak to.2. Jamie Change only shows the optimum stemma levels for each product A-H, and the return in the average inventory level to Garcia, but he overlooks the because changes in inventory-related embody (annual ordering hail, annual holding cost, and total cost). As shown below, for product A, D, E, F, G and H, whose present order quantity is higher than EOQ best order quantity, the decrease in order quantity increases the ordering cost while decreases the holding cost even more than, resulting a decrease in total cost. For product B, whose present order qua ntity is lower than EOQ optimal order quantity, the increase in order quantity increases the holding cost while decreases the ordering cost even more, resulting a decrease in total cost. For product C, whose present order quantity is similar to EOQ optimal order quantity, the holding cost, ordering cost and total cost tire outt change much. annual ordering cost = (yearly contend)/(order quantity) (setup hours per order) 25 Annual holding cost = 30% (product unit cost) (order quantitiy/2) Annual total cost = annual ordering cost + annual holding costIn general, the EOQ optimal order quantity result decrease the inventory-related total cost to the terminal level, which Jamie Change doesnt explain really clearly to Garcia.3. mainly speaking, to balance the costs with the desire to have the right products for customers, we have to lodge in all kinds of costs into account, such as the inventory costs, rent, personnel expenses, cost of goods sold, etc. Then we try to find the ri ght quantity to produce, expense to sell, to meet the take in with the lowest cost. But here Lynn Rosen is talking more about the inventory cost. When he talks about customer-service level and inventory investment funds, hes actually talking about meeting customers demand with optical inventory total cost. As is shown below, when he says unnecessary investment in inventories, he means the amount of cost higher than the lowest cost due to non-optimal order quantity.To improve the customer service, the demand will definitely increase. According to Oopt=2(Demand Rate)(Order Setup Cost)/(Holding Cost Rate)(1/2)the increase in demand rate will lead to the increase in Oopt, which will too lead to more inventory cost. As is shown below.4. From external, customers demand stream, especially its translation has a crucial role in determining the right, or optimal amount of inventory. From internal, all the holding cost and ordering cost are also keys determining the optimal amount of i nventory.