MMM267: Business Logistics - Implications of a Negative Cash-to-Cash Cycle - Management Assignment Help

Assignment Task:

Part 1
With the outbreak of COVID-19, the world is experiencing a severe shortage of ventilators for treating  patients in hospitals. DBS is a manufacturer of ventilators in Melbourne. It uses a special component  to make its top-of-the range ventilators. DBS requires an average of 24,000 units of this special  component every year in its manufacturing process. The major supplier of the special component that  DBS has been dealing with, is a preferred supply chain partner who charges a price per unit of $3000  for the component. Each order costs $500 to process. Because of limited storage space, the operations  manager wants to factor in inventory holding cost at 13.75% of the unit cost. You have been asked to: 

(1) Determine the economic order quantity (EOQ) and total annual cost if ordering the EOQ number  of units. How much will DBS be able to save by adopting the EOQ versus a current Q = 400? What is  the reorder point with safety stock if lead time is 21 days, standard deviation of weekly demand is  3.75 and on an average DBS operates for a total of 48 weeks every year? Assume a z value of 1.645  corresponding to the desired service level as specified in DBS’ operating procedures. What would the  reorder point be without safety stock and how would you interpret each of the two reorder points?  

(2) Environmental considerations, material losses and waste disposal can be included in the EOQ  model to improve inventory management practices. Assume that on an average 7.5% of the  components that DBS purchases are damaged in transit thus becoming unusable and have to be  disposed of. Disposal cost is $250 per unit. Find the new EOQ and total annual cost when the disposal  cost is considered. What implications does this have for the sustainability of DBS’ inventory practices? 

(3) Explain the implications to the operations manager if estimates of setup (order) costs include fixed,  semi-variable, and pure variable costs while inventory-holding costs includes only pure variable costs. 

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