Leo manufactures 6-inch Crescent wrenches (adjustable spanners). Alice has recommended two inventory control systems for the wrenches. She recommends EOQ with ROP and a weekly periodic order review process. The “order up to” quantity for the periodic order review model is 1,100 units and inventory level is reviewed every other week.
What are the costs of both models and what do you recommend?
Here’s the information on the wrenches.
Demand 12,000/year with a 10% coefficient of variation
Order cost $200/order
Holding cost $12/unit/year
Stockout cost $36/occurrence