Case Report: Jamie Chang Essay

1. Based on the assumption that all data calm argon accu set and the methods used to consume are reliable, the EOQ calculations are correct. Given by the EOQ model, the best Q ( step of an wander) is set by the par Oopt=2(Demand Rate)(Order Setup woo)/(Holding Cost Rate)(1/2). In this case, methodicalness setup salute=setup hours per straddle setup salute per hour belongings address rate= 30% merchandise unit cost.2. Jamie modify only shows the optimal strain trains for each product A-H, and the moderate in the average inventory level to Garcia, but he overlooks the consequently qualifyings in inventory-related cost (yearly inning cost, annual dimension cost, and heart cost). As shown below, for product A, D, E, F, G and H, whose present graze quantity is higher(prenominal)(prenominal) than EOQ optimal order quantity, the devolve in order quantity step-ups the ordering cost while decreases the safekeeping cost nevertheless much, resulting a decrease in heart cost. For product B, whose present order quantity is lower than EOQ optimal order quantity, the increase in order quantity increases the dimension cost while decreases the ordering cost even more, resulting a decrease in total cost. For product C, whose present order quantity is similar to EOQ optimal order quantity, the holding cost, ordering cost and total cost dont change much.Annual ordering cost = (yearly regard)/(order quantity) (setup hours per order) 25 Annual holding cost = 30% (product unit cost) (order quantitiy/2) Annual total cost = annual ordering cost + annual holding costIn general, the EOQ optimal order quantity allow for decrease the inventory-related total cost to the lowest level, which Jamie Change doesnt explain really intelligibly to Garcia.3. Generally speaking, to balance the costs with the propensity to have the discipline products for customers, we have to comprise all kinds of costs into account, such as the inventory costs, rent, personn el expenses, cost of goods sold, etcetera Then we try to find the right quantity to produce, price to sell, to meet the demand with the lowest cost. But here Lynn Rosen is talk moreabout the inventory cost. When he talks about customer-service level and inventory investment, hes actually lecture about meeting customers demand with opthalmic inventory total cost. As is shown below, when he says unnecessary investment in inventories, he means the marrow of cost higher than the lowest cost due to non-optimal order quantity.To improve the customer service, the demand will definitely increase. According to Oopt=2(Demand Rate)(Order Setup Cost)/(Holding Cost Rate)(1/2)the increase in demand rate will lead to the increase in Oopt, which will also lead to more inventory cost. As is shown below.4. From external, customers demand stream, peculiarly its variation has a crucial determination in determining the right, or optimal amount of inventory. From internal, all the holding cost and ordering cost are also keys determining the optimal amount of inventory.