Problem:
After a two year stint at Dunder Mifflin, you decided to jump ship and head over to Vandalay Industries (VI), a multinational conglomerate founded by Art Vandalay that specializes in the import/export of items, but also maintains a modest manufacturing facility in the US to handle specialty items. At VI, your job is to manage the operation of VI’s manufacturing division. VI makes several items in New York City, including a male undergarment (“Bro”), a female shirt (“Sue Ellen”), a pen that writes upside down (“Pen”), a cashmere sweater with a very small red dot (“Dot”), and a board game (“Contest”).
Your first job is to determine the optimal number of pens you should produce during each batching processing. You have an 8-week freeze window for your MRP system (by the way, you operate Pen manufacturing using an MRP system), so demand 8-weeks out is considered to be deterministic.
Below is your weekly demand for units of Pens. Each batch of Pens incurs a cost of $100 setup cost and a holding cost of $0.25 per item per week.
Using the EOQ Lot Sizing algorithm, what is the optimal ordering schedule for this item given the above demand and cost? What is the cost for this order schedule?
Repeat the above question using the W-W algorithm. What is the expected ordering schedule? What is the total cost? Hint: This goes much faster in Excel.
Do your two answers above agree? If not, why not? What are the advantages and disadvantages of using one algorithm over the other?