GROUP NAME: I KANnot STUDY

GROUP MEMBERS:

Khushi Kalpesh Pathak - 2018MT60783

Nehal Chachan - 2018BB10027
Abhishek Shringi - 2018CH10187

The monthly demand for your family is 10kg, which is bought monthly. The maximum
retail price (MRP) is INR400, on which generally there is a discount of 20%. But due to
a pandemic situation, you are expecting that the flour would be sold on MRP in the
coming months. Today, 20% discounted wheat flour is available in the local grocery
store. Based on the learning in your operations management course, suggest the right
amount of wheat flour be purchased this time. (Wheat flour should be used within 3 to 4
months of preparation).

The details we have been given in the question are:

Monthly requirement = 10 kg
Longevity of flour = 3 to 4 months
MRP = 400 rupees
Today’s one-time discounted price = 400 (1 - 0.2) = 320 rupees

There are several unknown constraints in this situation that we must consider.

1.) Holding capacity

The question does not say anything about how much flour can be stored in our
inventory, or any expenses that are borne by maintaining the inventory. If there was a
bound or a cost associated with the flour storage, we would have to develop a
mathematical equation to calculate the amount of flour that we can buy at the discounted
price.

Since the question currently does not mention anything about the capacity or holding
costs, we will assume for now that we have an infinite, zero-cost holding capacity.

2.) Current inventory

Since the family has a definite consumption of 10 kg of flour per month, the amount of
flour already existing in the inventory affects how much flour should be bought at the
 discounted price, since it is better to buy flour at the MRP at a later time than waste the
flour bought at the discounted price.

In the given question, no information about the current flour inventory has been
provided. Hence, we will be assuming that the current inventory is 0.

3.) Time-bound constraints

We have to consider two constraints here; Firstly, the flour purchased must be used up
within 4 months, and since the family consumes 10 kg of flour in a month, we can only
purchase up to 40 kg of flour, which will last us 4 months. Secondly, we also need to
consider our own financial power. Do we have the ability to purchase 40 kg of rice at the
current one-time discounted price? If not, how much rice can we purchase currently?

Since no information has been provided in the question about the financial status of the
buyer, we will assume that money is not a constraint.

Hence, buying 40 kg of flour right now at the discounted price is the optimal decision. It will
last the family 4 months and provide the buyer with savings of 20%.