Option 1: Purchase from supplier

Inventory carrying cost

Annual demand 3200 Cost of capital
Days of operation/year (days) 250 Investment in Inventory
Tax+Insurance on Inv
Inventory shrinkage
Warehouse overhead
Additional cost incurred in inventory maintenance
Additional cost in % of Inventory investment
Total cost of Inventory in % item cost per year
Unit purchase cost
Inventory carrying cost per unit per year
EOQ 348.1553
No of orders per year 9.1913 Max Inventory
Cycle time in days 27.19963 Min Inventory
Avg demand during LT 64 Average Inventory
SD of demand during LT 10 Annual holding cost
Stockout% 0.108799 Annual ordering cost
Service level 0.891201 Annual purchase cost
Z 1.232943 Total annual cost
Safety stock 12.32943
Reorder point 76.32943

Option 2: Produce Inhouse

Annual demand 3200 Inventory carrying cost
Prod. Rate/month 1000 Production cost/unit
No of working days/month 20.83333 % Annual Inv carrying cost/unit
Prod. Rate/day (p) 48 Inventory carrying cost per unit per year
Demand/day (d) 12.8

EPQ 966.1253 Max Inventory

No. of prod. Runs 3.3122 Min Inventory
Cycle time in days 75.47854 Avg Inventory
Avg demand during LT 128 Annual Inventory carrying cost
SD of demand during LT 20 Annual setup cost
Stockout% 0.301914 Annual production cost
Service level 0.698086 Total annual cost
Z 0.518903
Safety stock 10.37806
Reorder point 138.3781
 Ordering cost
14% Hours required to process one order 2
600,000 Salaries per hour 28
24,000 Employees cost for one order 56
9000 Stationery expenses per order 19
15000 Total ordering cost per order 75
48,000
0.08
22%
18
3.96

360.4847
12.32943
186.4071
738.1721
689.3475
57600
59027.52

Setup cost
17 Time needed for one setup (hour) 8
22% Cost of labour and lost prod time/hr 50
3.74 Setup cost per setup 400

718.87
10.37806
364.624
1363.694
1324.88
54400
57088.57