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Supply chain management
NMIMS Global Access
School for Continuing Education (NGA-SCE)
1. M/s ANC, handles a variety of white goods. One of the key products is the refrigerator “Coolfrost”. Considering the increasing demand (and demand variation) of this product, company has built a substantial inventory for the same in the Warehouse. The annual fixed cost of the warehouse of US$12,500. Since the refrigerators are imported from China, company is incurring following ordering costs
- Delivery cost per order = US$750
- Import Duty per Order = US$350
- Custom Fees per Order = US$250
- Import License per Order = US$25
Historically, there has is a total annual demand of 9600 pieces (monthly demand of 800 pieces with a standard deviation of 120 pieces). The supply lead time is 0.5 month with a standard deviation of 0.2 month. company is conveniently placing two orders every month with an average qty of 400. The cost per refrigerator is US$390. The annual holding cost rate is 30%. Calculate cycle stock and safety stock point if the firm is willing to tolerate a 1% chance (Z0.99 = 2.32) of a stockout during an order cycle. Also calculate the total cost of inventory.
Answer: We are given the following information:
Item cost: c = $390 per piece
Holding cost = 0.30 per piece
Lead time: L = 0.5 month
Average demand rate: d = 400 pieces per month
Standard deviation of demand: σd =
2. A trading company imports the car batteries from Taiwan and supplies to the car manufactures in India. The annual demand is approximately 18,000 batteries. The cost price per battery is $100 for and estimated annual holding cost is 20% of the product’s value. It costs approximately $200 to place an order (ordering cost). The company currently orders 1500 power tools per month (considering LT as 30 days).
a. Determine the ordering, holding, and total inventory costs for the current order quantity.
b. Determine the economic order quantity (EOQ).
c. How many orders should be placed per year using the EOQ?
d. Determine the ordering, holding, and total inventory costs for the EOQ.
Answer: Given data:
Annual demand (D) = 18000 batteries
Cost price = $100 per battery
Holding cost = 20% of the product value
= 0.20*100
= 20 per year per battery
Ordering cost = $200 per order
Quantity ordered by the company = 1500 tools per month
= 1500*12
3. a. Income statement of M/s ABC from 2019 showed the cost of goods sold (COGS) was $72M, and its average inventory value during the same period was $18M. Calculate company’s number of Inventory Turns Ratio (ITR) for that year and Days of Inventory Outstanding(DIO). Also state the difference between the key inventory indicators; Inventory Turns Ratio and Days of Inventory Outstanding.
3. b. Considering the demand data mentioned in below mentioned table, calculate the Forecasting for the month of April using Simple Moving Average method and Weighted Moving Average method. Also explain the difference and application of both the methods.
| Month | Demand | Weightage |
| Jan | 200 | 0.25 |
| Feb | 190 | 0.35 |
| Mar | 180 | 0.40 |
| Apr | Forecast? |
Answer: a) Inventory turnover ratio = cost of goods sold/ average inventory value
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