CC is a retailer of computer equipment in Minneapolis with four retail outlets. Currently each outlet manages its ordering independently. Demand at each retail outlet averages equal 3114 units per week. Each unit costs $300 and CC has a holding cost of 25%. The fixed cost of each order (administrative + Transportation is $1,000. Assume 50 weeks in a year.
- Given that each outlet orders independently and gets its own delivery, calculate the optimal order size (EOQ) at each outlet.
- What is the average inventory at each outlet?
- CC is thinking of centralizing purchasing for all four outlets. In this setting CC will place a single order for all outlets with the supplier. The supplier will deliver the order on a common truck to a transit point. Since individual requirements are identical across outlets, the total order is split equally and shipped to the retailers from this transit point. This entire operation has increased the fixed cost of placing an order to $1800. What should the EOQ be for the set of all four outlets
- What is the average inventory per outlet in the new CC system?
- Explain the change from part B to part D