TOD 522- Supply Chain & Logistics

Management

Assignment: - Inventory Management

Submitted to: Prof. Aravind Panicker

Date: 21st February, 2020

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Product A

For Product A

Purchase Price 20 Cost of Understocking 20

Selling Price 40 Cost of Overstocking 20
Shelf Life 1 f(Q) 50.00%

Row Labels Count of Demand

Count of Demand2 Cumulative Demand2
30 5 5% -
31 8 8% 13%
32 11 11% 24%
33 9 9% 33%
34 16 16% 49%
35 6 6% 55%
36 15 15% 70%
37 7 7% 77%
38 7 7% 84%
39 9 9% 93%
40 7 7% 100%
Grand Total 100 100%

Incase of understocking In case of Overstocking

Expected Sales Demand Probability Expected Sales Demand Probability

if ordered quantity is <= 34 34 0.49 if ordered quantity is >= 34 34 0.49
if demand is > 34 35 0.51 if demand is < 34 33 0.51
Expected Sales (Qu) 34.51 Expected Sales (Qu) 33.49

Expected Sales Demand Probability Expected Sales Demand Probability

if order quantity is <= 35 35 0.55 if order quantity is >= 35 35 0.55
if demand is > 35 36 0.45 if demand is < 35 34 0.45
Expected Sales (Qo) 35.45 Expected Sales (Qo) 34.55

Expected Revenue(34 units) 1360 Expected Revenue(33 units) 1320

Cost Price 680 Cost Price (34 units) 680
Profit 680 Profit 640
Salvage Value 0

Expected Revenue(35 units) 1400 Expected Revenue(34 units) 1360

Cost Price 700 Cost Price (35 units) 700
Profit 700 Profit 660
Salvage value 0

Optimum order quantity for product A is 35 units, since it provides maximum

profit of Rs.700

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Product B

Purchase Price 25 Cost of Understocking 20

Selling Price 45 Cost of Overstocking 25
Shelf Life 1 f(Q) 0.44

Row Labels Count of Demand Sum of Demand Cumulative Demand2

15 4 2.86% 3%
16 9 6.86% 10%
17 6 4.86% 15%
18 6 5.15% 20%
19 5 4.53% 24%
20 13 12.39% 37%
21 8 8.00% 45%
22 9 9.43% 54%
23 13 14.24% 68%
24 10 11.43% 80%
25 17 20.25% 100%
Grand Total 100 100.00%

Incase of understocking In case of Overstocking

Expected Sales Demand Probability Expected Sales Demand Probability

if ordered quantity is <= 20 20 0.37 if ordered quantity is >= 20 20 0.37
if demand is > 20 21 0.63 if demand is < 20 19 0.63
Expected Sales (Qu) 20.63 Expected Sales (Qu) 19.37

Expected Sales Demand Probability Expected Sales Demand Probability

if order quantity is <= 21 21 0.45 if order quantity is >= 21 21 0.45
if demand is > 21 22 0.55 if demand is < 21 20 0.55
Expected Sales (Qo) 21.55 Expected Sales (Qo) 20.45

Expected Revenue( 20units) 900 Expected Revenue( 19units) 855

Cost Price 500 Cost Price ( 20units) 500
Profit 400 Profit 355
Salvage Value 0

Expected Revenue( 21units) 945 Expected Revenue(20units) 900

Cost Price 525 Cost Price (21 units) 525
Profit 420 Profit 375
Salvage value 0

Optimum order quantity for product B is 21 units, since it provides maximum

profit of Rs.420

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Product C

Purchase Price 30 Cost of Understocking 25

Selling Price 55 Cost of Overstocking 30
Shelf Life 1 f(Q) 45.45%

Row Labels Count of Demand Count of Demand2 Cumulative Demand2

12 15 15.00% 15%
13 15 15.00% 30%
14 10 10.00% 40%
15 11 11.00% 51%
16 16 16.00% 67%
17 11 11.00% 78%
18 22 22.00% 100%
Grand Total 100 100.00%

Incase of understocking In case of Overstocking

Expected Sales Demand Probability Expected Sales Demand Probability

if ordered quantity is <= 14 14 0.40 if ordered quantity is >= 14 14 0.4
if demand is > 14 15 0.60 if demand is < 14 13 0.6
Expected Sales (Qu) 14.6 Expected Sales (Qu) 13.40

Expected Sales Demand Probability Expected Sales Demand Probability

if order quantity is <= 15 15 0.51 if order quantity is >= 15 15 0.51
if demand is > 15 16 0.49 if demand is < 15 14 0.49
Expected Sales (Qo) 15.49 Expected Sales (Qo) 14.51

Expected Revenue( 14units) 770 Expected Revenue(13units) 715

Cost Price 420 Cost Price ( 14 units) 420
Profit 350 Profit 295
Salvage Value 0

Expected Revenue( 15units) 825 Expected Revenue(14 units) 770

Cost Price 450 Cost Price (15 units) 450
Profit 375 Profit 320
Salvage value 0

Optimum order quantity for product C is 15 units, since it provides maximum

profit of Rs.375

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Product D

Purchase Price 70 Cost of Understocking 55

Selling Price 125 Cost of Overstocking 70
Shelf Life 2 f(Q) 0.44

Row Labels Count of Demand Count of Demand2 Cumulative Demand

25 6 6% 6%
26 10 10% 16%
27 9 9% 25%
28 8 8% 33%
29 12 12% 45%
30 9 9% 54%
31 7 7% 61%
32 10 10% 71%
33 9 9% 80%
34 10 10% 90%
35 10 10% 100%
Grand Total 100 100%

Incase of understocking In case of Overstocking

Expected Sales Demand Probability Expected Sales Demand Probability

if ordered quantity is <= 28 28 0.33 if ordered quantity is >= 28 28 0.33
if demand is > 28 29 0.67 if demand is < 28 27 0.67
Expected Sales (Qu) 28.67 Expected Sales (Qu) 27.33

Expected Sales Demand Probability Expected Sales Demand Probability

if order quantity is <= 29 29 0.45 if order quantity is >= 29 29 0.45
if demand is > 29 30 0.55 if demand is < 29 28 0.55
Expected Sales (Qo) 29.55 Expected Sales (Qo) 28.45

Expected Revenue( 28 units) 3500 Expected Revenue(27 units) 3375

Cost Price 1960 Cost Price ( 28 units) 1960
Profit 1540 Profit 1415
Salvage Value 0

Expected Revenue( 29 units) 3625 Expected Revenue(28 units) 3500

Cost Price 2030 Cost Price (29 units) 2030
Profit 1595 Profit 1470
Salvage value 0

Optimum order quantity for product D is 29 units, since it provides maximum

profit of Rs.1595

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Product E

Purchase Price 120 Cost of Understocking 130

Selling Price 250 Cost of Overstocking 120
Shelf Life 2 f(Q) 0.52

Row Labels Count of Demand Count of Demand2 Cumulative Demand

29 11 11% 11%
30 10 10% 21%
31 9 9% 30%
32 11 11% 41%
33 8 8% 49%
34 15 15% 64%
35 11 11% 75%
36 18 18% 93%
37 7 7% 100%
Grand Total 100 100%

Incase of understocking In case of Overstocking

Expected Sales Demand Probability Expected Sales Demand Probability

if ordered quantity is <= 33 33 0.49 if ordered quantity is <= 33 33 0.49
if demand is > 33 34 0.51 if demand is < 33 32 0.51
Expected Sales (Qu) 33.51 Expected Sales (Qu) 32.49

Expected Sales Demand Probability Expected Sales Demand Probability

if order quantity is <= 34 34 0.64 if order quantity is <= 34 34 0.64
if demand is > 34 35 0.36 if demand is < 34 33 0.36
Expected Sales (Qo) 34.36 Expected Sales (Qo) 33.64

Expected Revenue( 33units) 8250 Expected Revenue(32units) 8000

Cost Price 3960 Cost Price ( 33 units) 3960
Profit 4290 Profit 4040
Salvage Value 0

Expected Revenue( 34units) 8500 Expected Revenue(33 units) 8250

Cost Price 4080 Cost Price (34 units) 4080
Profit 4420 Profit 4170
Salvage value 0

Optimum order quantity for product E is 34 units, since it provides maximum

profit of Rs.4420

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