BUSI640 Quantitative Inventory Analysis Assignment

BUSI 640

QUANTITATIVE INVENTORY ANALYSIS ASSIGNMENT INSTRUCTIONS

 OVERVIEW

The assignment will provide practical knowledge in determining safety stock calculations so that healthcare stock items can be available when needed at the point of service. Hospitals require that their inventory management systems always maintain an optimum safety stock to prevent any stock-outs, which enables the clinical care team to maintain the quality of care and patient satisfaction and to avoid emergency orders of equipment and supplies that are at a high cost. The quantity of the buffer stock that is needed by any hospital system is dependent upon on the lead time to deliver.

INSTRUCTIONS

 The assignment will provide practical knowledge in determining safety stock calculations so that healthcare stock items can be available when needed at the point of service.

Use the Quantitative Inventory Analysis Template for the following problem:

Hospital purchasing agent Abby Smith needs to order examination gloves for the hospital. Currently, she orders 1,000 boxes of gloves whenever she thinks there is a need. Abby has heard that there is a better way to do this and wants to use economic order quantity to determine how much to order and when to order. She collects the following information.

 Cost of the gloves: $4.00 per box

 Carrying costs: 33%, or $__________ per box

Cost of ordering: $150 per order

Lead time: 10 days

Annual demand: 10,000 boxes per year

a. Tab 1 (Basic EOQ/ Economic Order Quantity) What quantity should Abby be ordering? Prove that your order quantity is “better” than Abby’s by graphing ordering costs, holding costs, and total costs for 1,000, 1,500, and 2,000 boxes.

 b. Tab 2 (ROP no SS/ Reorder Point No Safety Stock) How often will Abby need to order? About how many days will there be between orders?

 c. Tab 2 (ROP w SS/ Reorder Point No Safety Stock) Assuming that Abby is not worried about safety stock, when should she place this order?

d. Tab 3 (ROP w SS/ Reorder Point with Safety Stock) Abby decides she will be happy if the probability of a stockout is 5 percent. How much safety stock should Abby carry? Items to include are outlined as follows:

• Length of assignment 1 excel sheet / 3 tabs o 1 excel spreadsheet

? Tab 1 EOQ (Economic Order Quantity)

? Tab 2 ROP no SS (Reorder Point No Safety Stock)

 ? Tab 3 ROP w SS (Reorder Point with Safety Stock)

Notes on Using the EOQ Template

All values in blue cells are to be entered by the user. All other values are automatically calculated and do not need to be altered. Each worksheet has a sample value set entered. Make sure to clear all values before proceeding with your own data. Cells with red marks in the upper right corner have comments. Let the mouse hover over those cells to read the comments to further explain the template model.

This spreadsheet is locked to keep the cells with equations from being changed.