You are the Stores Manager at the Ministry of Information and you have the responsibility of managing store room No. 101 where all blank papers for this Ministry are kept. The annual consumption of paper for your Ministry is usually 3,400 reams. Currently your Ministry purchases 300 reams per order and pays $3 per ream. The supplier has just announced that orders of 1,000 reams or more will be filled at a price $2 per ream. The Ministry incurs a cost of $100 each time it submits an order and incurs an annual holding cost of 17 percent of the purchase price per ream.
a. Determine the order size that will minimize the total cost.
b. If the supplier offered a discount at 1,500 reams instead of 1,000 reams, what order size would minimize total cost?
c. You have been invited at a meeting with the Minister who has the intention to modernize the inventory system of the Ministry. Explain to the Minister the two major types of inventory counting systems.
d. Which type of new technology for collecting data would you suggest to the Minister and give the advantages of using them.