IFB201TC Inventory and Warehouse Management

Tasks:

Section A:

Assume you have a shop and one of items you are selling is hair dryers. Please use what you learned in inventory related lectures to answer the following questions:

1. There is a decision-making difficulty for the choice of the right order quantity. Based on what you learned in the class, you think EOQ might be a good starting point for this inquiry. You choose to assume the demand is constant throughout the year. From the sales record provided by the company, you find in last year, the company sold 20000 hair dryers. The company purchases the hair dryers from its supplier at 20 RMB/dryers. You further estimate the costs of placing an order is 400RMB each time, and in average the monthly cost of holding inventory per hair dryer is around 4% of purchase cost per hair dryer. Based on the information collected, if back order is not allowed, how many hair dryers will you suggest to be ordered each time and why? Please round your answer to 3 decimal places. 50 words limit. (15 marks)

2. In the first scenario, you hired two experts (Alex and Steve) for further analysis. Alex estimates the annual cost of back order per hair dryer is 50% of purchase cost of each hair dryer, whereas Steve believes that the annual cost of back order per hair dryer is 150% of purchase cost of each hair dryer. If back order is allowed, then:

· how many hair dryers will you suggest to be ordered each time for Alex case?

· how many hair dryers will you suggest to be ordered each time for Steve case?

· What is the difference between two above cases that you can observe it?

Please round your answer to 3 decimal places. 100 words limit.  (25 marks) 

3. Similar to A1, again assume that back order is not allowed anymore. Also, assume a monopoly in supplier side in which there is one supplier of this very new type of hair dryer (there is no simple supplier substitute). The supplier has many customers in addition to you. Consequently, in order to prioritize yourself to other customers, you should offer extra money to the supplier according to its following price table:

· The current price of 20 RMB per dryer is only valid if you order less than 1000.

· The supplier increases unit price for 5% if you order between 1000 or more dryers per order.

In these circumstances what should their ordering arrangements be? Please round your answer to 3 decimal places. 50 words limit. (25 marks)

Section B:

Assume you are also running a university restaurant independently. Every morning, you make good quality Steamed Bun, and you estimate the cost of one steamed bun is around 1 RMB. The sales price for each steamed bun is 4RMB, but if in the evening, there are steamed buns unsold, you have to dispose of them as they are not fresh anymore. Currently, you do not know how many steamed buns you should make in the morning.

1. Suppose the daily demand of steamed buns is normally distributed with mean of 100 and standard deviation of 20, how many steamed buns would you like to prepare each morning and why? Please round your answer to 3 decimal places. 50 words limit. (10 marks)

2. Starting from the newsboy formula and your answer of 1, please discuss the possible solutions to reduce food waste and its negative impacts. 150 words limit. (25 marks)