'Case Blanchard Essay\r'

'In the course of Operations Management was given to us a Harvard Business case study, â€Å"Blanchard Importing and Distributing Co. , Inc”. The community is a liquor distributer and bottler which, is struggling with stocktaking management problems. The aim of our work is to help the trainee, Hank Hatch, analyzing the fellowship’s computer programing system and generate recommendations with the spirit of solving problems intrinsically related with Inventory management.\r\nFirstly, we be going to calculate the EOQ and ROP quantities based on 1971’s need, then we compare this jimmys with the ones obtained upon the implementation of the computer programing system, in 1969, as well as with the scheduling system invented by Bob and Elliot . We are overly going to approach the differences amid the formal and the slack systems, choosing the best one for the company and finally present our recommendations which are aimed to solve the detected problems. Econ omic enjoin Quantity stick\r\nOperations Managers regularly formula with finiss of â€Å"How much” or â€Å"How many” of something to produce or buy in place to satisfy the intragroup and external requests for a certain item. The majority of those decisions do non always take into account the woo consequences that would occur. The Economic Order Quantity assume, and also supposed â€Å"EOQ Formula”, is often very helpful in guiding managers about the beau monde touchstone decision regarding consequences. The EOQ Model was developed by Ford W.\r\nHarris in 1913 and it corresponds to the level of inventory that minimizes the gist place appeal and ordering personifys of the inventory. Graphic In early(a) words, the Economic Order Quantity is known as the cost-minimizing order- meter which takes in servant the existing tradeoff between ordering cost and storage cost. Basic assumptions of this Model: Replenishment occurs instantaneously; Demand is constant and non stochastic; There is a fixed frame-up cost K independent of the order quantity; Only one product is involved; Lead meter is zero, does not vary; There are no quantity discounts.\r\nLeadtime According to EOQ Model, the leadtime is zero. The leadtime is the time interval between placing the order and receiving the corresponding order quantity which means that pitch or manufacturing is instantaneous, the rehabilitation occurs instantaneously. Although this assumption is obviously unrealistic, it removes the hesitation â€Å"When to order? ” by answering to order â€Å"Q” units separately time inventory falls to zero. Costs The EOQ Model presents three types of costs: Cost of the units themselves; Cost of prop units in inventory; Fixed order cost or manufacturing setup cost.\r\nThe unit cost is the cost of the units themselves, denotes C, and is assumed to be fixed regardless the morsel of units ordered or manufactured. The holding cost or carrying costs, denotes h, represents the management’s cost of capital, the time value of money invested in units; includes the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the hazard cost of capital. The setup cost, denotes S, represents all the costs associated with placing an order without consider the cost of the units themselves, for instance, any administrative cost of placing and/or receiving an order.\r\nReorder shoot down The range delegate (ROP) also called reorder level, reorder quantity or replenishment order quantity is the inventory level of an item which signals the need for placement of a replenishment order. So, the ROP occurs when the level of inventory drops down to zero. To compute ROP is demand to perceive the minimum level of inventory that is held as a protection against shortages, safety stock. Reorder Point = Normal consumption during leadtime + Safety Stock Determinants of the reorder poi nt: Rate of demand; Leadtime; Extent of demand and/or leadtime variability; Degree of stockout risk delicious to management.\r\nCase Analysis 1. Recalculating EOQ and ROP Recalculating EOQ: We have to take into consideration the new information about demand and the germane(predicate) costs. The relevant costs are: setup costs, holding costs and social unit Costs. For the Demand we handling the total demand of 1971 (exhibit 5). Setup Cost: To calculate the setup costs, we had only taken into account the ones which varied with the form of setups, as we can observe, the only one with this characteristics is the enounce changeover cost. The time needed to reset machinery to a different kind of label is 30 minutes, during that time all the five part-time workers remain idle.\r\n thus incurring in a cost fair to middling to the salary earned by this five workers in the half an hour stop. Holding Cost: We use the 22. 5% value said on the guidelines of the case. Unit Cost: For the un it cost, we should only consider the expenses that Blanchard supports when producing. Thus, for the enumeration we will sum the Materials cost, the bottling labor, the variable overhead, the customs trading and the federal rectification tax. Our selection was based on two assumptions: variable costs and the costs paid before the sales.\r\n'