Packing Crate Inventory MG7305 You’ve recently been hired as a project manager at a distributor of fruits and vegetables located in Northern Kentucky. An operations manager has asked for your help in analyzing current inventory policies related to packing crates. She’s looking for a lower cost policy. Currently, the operation buys crates from a regional supplier. The operation uses 2400 crates each month. Annual carrying cost is 18% of the $6 acquisition cost per crate. Each order costs approximately $40. Crate supplier lead time is 5 days. Currently, the operation orders crates every two months You’ve been asked to develop a lower cost alternative to the existing crate inventory policy. Some issues to consider: What is the basis behind the alternative policy that you are proposing and why is it a compelling alternative? Compare the features of each policy (Q, #cycles per year, T,r). Compare the costs of each policy (ordering, holding, TAC). What is a conservative next step (CNS) based on your analysis? A couple of things to consider. Is the reduction in cost of the proposed policy worth the hassle of changing people’s behavior? If cost saving in the case of crates seems low, keep in mind that crates are likely one of many inputs ordered from suppliers. Perhaps trying the new policy on crates, and then expanding the approach to other items if the initial trial is successful, would be worthwhile. Assuming that the crate savings represents the average savings on an item ordered using the new policy approach, and that the operation orders 100 different items, what would be the projected annual savings if the policy was broadly implemented? What are the limitations of this analysis?

Question 1 5 pts
Inventory policies based on finding the economic order quantity (EOQ) are compelling because they:
O Assume that demand is constant.
O Require close coordination with suppliers to implement.
O Minimize total costs related to ordering and holding inventory.
O Provide an exact amount to order.
O Permit precise calculation of inventory ordering costs.

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