Calculate the optimal order quantity

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Reference no: EM131791117

The propane reseller GasPan is during peak season selling in average 71.9 propane cylinders per day, operating 300 days per year. The reseller is sourced with propane cylinder from the main plant in Winterthur, from where cylinders are always delivered one day after order order has been placed. For each delivery that reseller is charged 50$. Each cylinder has a value of 64$. Analysis of the sales shows that the standard deviation of the sales per day, equals 17.6.

a) Calculate the optimal order quantity, assume an annual holding cost of 15% of hold inventory.

b) Gas Pan wants to have a service level of 99%, recommend an inventory controlled strategy that will support the strategy.

GasPan is always carefully analyzing its supply chain and the associated costs, and has found that thet in order to improve efficiency all orders delivered to the resellers must be delivered in full pallets where each pallet contains 12 cylinders. It has also been decided to use another transport contractor, in this new contract the lead time has been increased to two days.

c) Calculate the percentage increase of the holding and ordering costs during the peak season due to the new policy.

Reference no: EM131791117

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