Compare the total cost of independent eoq policies

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Reference no: EM132153101

Compare the total cost of independent EOQ policies by the retailer & manufacturer with the total cost using a collaborative supply chain approach. Consider a low profit margin item in a highly competitive market.

The retailers purchasing cost = C(r) = $40/unit

Demand = 5,000,000 units/year

Fixed setup cost k(r) = $900/order

holding cost rate is 25% of the unit cost of the item, so that holding cost : h(r) = 0.25 * C(r) = $10/unit/year

The manufacturer's purchasing cost C(m) = $20/unit

Fixed setup cost k(m) = $65,000/order

Holding cost rate is 20% of the unit cost, so that the holding cost is: h(m) = .20 * C(m) = $4/unit/year

Reference no: EM132153101

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