Part A
Wagga Industrial Electronics Distributors (WIED) is involved in distributing electronic components to a range of commercial customers. The average demand for a particular item of inventory is 720 units per day. The item is sold at a cost of $20.00 a unit from Regional Computing Components. The holding cost is 22% per unit per year. It has been established that the cost of each order in the organisation is $250.00 per order. What is the economic order quantity and the total cost for this policy?
A second supplier, Regional Computer Bits, (RBC) intends to sell this item at a cost that is lower ($19.00 per unit). But the minimum order quantity for each order is 10,000 units. Should this item be bought from RCB or WIED (Assume a 5-day working week, and 50 working weeks a year)
Part B
Explain how such a basic mathematical model used in this question (the EOQ or Quantity Discount modes) can be altered to make it more realistic to include features of safety stock and re-order points.
Part C
There are a number of modern inventory control methodologies. However, not many organizations have adopted them. Explain the reasons that modern inventory control methods and systems are not in popular usage. Discuss also how organisations can be persuaded to adopt modern inventory control methodologies.