QUESTION 1 [20 MARKS]
Consider yourself as the procurement executive for Woolworth conglomerate with many branches taking stock of goods from a central inventory facility. The management of Woolworth has identified “Men’s Summer Shoes” as the fastest-moving inventory item during the upcoming summer season with an average demand of 600,000 units per year. The cost of each unit is R1000, and the inventory carrying cost is R 100 per unit per year. The average ordering cost is R300 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 1200 units. (This is a corporate operation, and there are 250 working days per year.)
1.1) Using the information above, what is the minimum order quantity that can be ordered at the least cost (EOQ)? [5 Marks]
1.2) What is the average inventory if the EOQ above is used? [5 Marks]
1.3) What is the optimal number of orders per year? [5 Marks]
1.4) What is the optimal number of days in between any two orders? [5 Marks]
