Determine optimum quantity of wine to be ordered each time

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Reference no: EM132282485

The restaurant works with several national and foreign wine suppliers. One of the best-selling wines is supplied by a wine cellar located in the Douro region, in boxes of 6 bottles at the price of 24 euros per box. The monthly needs of this wine are 600 bottles. Currently the Pousada Palacio de Estoi uses a continuous review system, ordering 100 boxes of wine each time an order is placed. Based on recent studies, it was concluded that the cost of holding a box of this wine in stock for one year amounts to 2 euros. On the other hand, it is known that the delivery time is one month and the administrative costs of placing an order, including transport costs, are 75 euros.

a) Evaluate whether the current stock management policy for this wine is optimal. In case the current policy is not optimal, determine the optimum quantity of wine to be ordered each time, the number of orders to be placed per year and the reorder point.

b) The wine supplier has informed the restaurant that if all the wine needed during the year is ordered at once, the supplier is prepared to offer a discounted price for each box. In your opinion, what should the minimum amount of the discount per box be, in order to be advantageous for the restaurant to order all the wine at once.

Reference no: EM132282485

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