Question

Q6) Hip Replacements, Inc., has a master production schedule for its newest model, as shown of 1 week. What are the costs of using (a) EOQ and (b) POQ for this 10-week period? below, setup cost of $50, a holding cost per week of $2, beginning inventory of 0, and lead time a addevajhy WEEK nd 10 2 4 6 Gross requirements Schedu ed receipts 50 35 100 15 C Projected on hand 24 0 0 14 24 14 14 11 28 28 Net requirements C 50 21 72 Planned order receipts 64 32 32 96 Planned order re eases 64 32 32 96 un O

Answer 1

Average weekly demand, D = (0+0+50+0+0+35+15+0+100+0)/10 = 20

Setup cost, S = $ 50

Holding cost, H = $ 2

EOQ = sqrt(2DS/H) = sqrt(2*20*50/2) = 32

(a) MRP based on EOQ is following:

A B C D E G H J K WEEK 1 1 2 3 4 7 8 9 10 Gross requirements 3 Scheduled receipts 4 Projected on hand 5 Net requirements 6 Planned Order Receipts 2 0 50 0 35 15 0 100 0 14 14 14 11 28 28 24 24 0 50 21 4 0 72 0 64 32 32 0 96 Planned Order Releases 32 32 7 64 96 10 11 12 13 14 (n LO et

FORMULAS:

WEEK		1	2	3	4	5	6	7	8	9	10
Gross requirements		0	0	50	0	0	35	15	0	100	0
Scheduled receipts
Projected on hand	0	=MAX(0,B4-C2+C3+C6)	=MAX(0,C4-D2+D3+D6)	=MAX(0,D4-E2+E3+E6)	=MAX(0,E4-F2+F3+F6)	=MAX(0,F4-G2+G3+G6)	=MAX(0,G4-H2+H3+H6)	=MAX(0,H4-I2+I3+I6)	=MAX(0,I4-J2+J3+J6)	=MAX(0,J4-K2+K3+K6)	=MAX(0,K4-L2+L3+L6)
Net requirements		=MAX(0,C2-C3-B4)	=MAX(0,D2-D3-C4)	=MAX(0,E2-E3-D4)	=MAX(0,F2-F3-E4)	=MAX(0,G2-G3-F4)	=MAX(0,H2-H3-G4)	=MAX(0,I2-I3-H4)	=MAX(0,J2-J3-I4)	=MAX(0,K2-K3-J4)	=MAX(0,L2-L3-K4)
Planned Order Receipts		=B7	=C7	=D7	=E7	=F7	=G7	=H7	=I7	=J7	=K7
Planned Order Releases			64			32	32		96

Sum of projected on hand = 0+0+14+14+14+11+28+28+24+24 = 157

Total cost = Number of order release * Setup cost + Sum of projected on hand * Holding cost per unit

= 4*50+157*2

= $ 514

(b) POQ

Review period = Q/D = 32/20 = 1.6 ~ 2 weeks

Order is relased every 2 weeks. Every order quantity is equal to next 2 weeks' requirement.

Resulting MRP is following:

A C D E K L M 1 WEEK 1 2 3 4 6 7 9 10 2 Gross requirements 0 0 50 0 0 35 15 0 100 Scheduled receipts 3 4 Projected on hand Net requirements C 0 0 14 14 46 11 28 28 24 24 0 0 50 0 0 4 72 Planned Order Receipts 6 0 0 64 0 32 0 32 0 96 0 Planned Order Releases 7 64 32 32 96 9 10 11 - un - n D

Sum of projected on hand = 0+0+14+14+46+11+28+28+24+24 = 189

Total cost = Number of order release * Setup cost + Sum of projected on hand * Holding cost per unit

= 4*50+189*2

= $ 578