Answer to Question #297095 in Management for Jack Patz

Question

Assume you are a part of the Operations team in an automobile manufacturing setup. You

are also working in coordination with other departments. Discuss the following aspects of

the operations of your organisation

Discuss the concept of EOQ in brief. Using the data below, find EOQ, and the reorder point.

Annual Demand: 15,000 units; Weeks Operating: 50 weeks/year; Ordering Costs: Rs.

60/order & Holding Costs: Rs. 7/unit/year; Lead-Time: 5 weeks & Safety Stock: 250 units

Answer 1

E.O.Q can be defined as the quantity that is ideal to be ordered with the aim of minimizing costs associated with inventory such as shortages, holding cost and ordering costs.

Reorder point = 15000/50

= 300