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An upscale home fixture supplier has four locations. Each location manages its ordering independently. The specialized lighting fixture sells for $300 and sales are on average 30 units per week. Currently the supplier orders 10-week supply from the manufacturer. The supplier pays $150 per fixture, and it takes two weeks to receive each delivery. The administrative cost of placing each order is estimated at $225. The supplier estimates the cost of capital at 20%. Assume 52 weeks in a year.
a) What are the annual ordering cost, annual holding cost and total cost functions?
b) Given that each outlet orders independently and gets its own delivery, determine the optimal order size at each outlet.
c) How many orders must be placed annually?
d) How frequently orders must be placed?
e) On average what is the flow time of a fixture through the process.
f) What is the inventory turnover ratio? What does the value mean?
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