Assignment 1 - Case Study (Individual Assignment) Dynamic Lot Sizing The dynamic lot-size model in inventory theory, is a generalisation of the...

Q1

(2 marks)

Given that the total demand of the whole year is 10,000 products, suppose the company is going to use the EOQ

model for the accumulated demand of one year (10,000). In other words, ignore the monthly demand. how do you calculate?

optimal order quantity, total costs, frequency of orders, time between orders.

Assignment 1 - Case Study (Individual Assignment) Dynamic Lot Sizing The dynamic lot-size model in inventory theory, is a generalisation of the Economic Order Quantity [EOQ) modelthat takes into account that demand for the product varies over time. Dynamic lot sizing sometimes refers to as ‘Time-Varying Demand’ as well. In contrast to EOQ model where demandis constant, in the time-varying deterministic demand model, demands of various periods are unlike. The variationscan depend on different reasons. For example, production on a contract, which requires that certain quantities aredelivered on specified dates. Note that we are still considering deterministic demand, i.e., all variations are known inadvance. In the basic models, lead-time is disregarded. When dealing with lot sizing for time-varying demand, it isgenerally assumed that there are a finite number of discrete time steps, or periods. A period may be, for example, 1day or a week. We know the demand in each period, and for simplicity, it is assumed that the period demand takesplace at the beginning of the period. There is no initial stock. When delivering a batch, the whole batch is deliveredat the same time. The holding cost and the ordering cost are constant over time. No baekorders are allowed. We shalluse the following notation: Var Definition = number of periods, = demand in period i, i = 1,2,...,T,00 = ordering cost, H C = holding cost per unit and time unit. Problem Costco has received the following demands for a product in 2020: Month 1 2 3 4 5 6 7 8 9 10 11 12Demand30070080090033002006009002003001000800 Suppose ordering cost (00) is $504 and holding cost (HC) of one unit of product in a year is $3.There is no shortage cost. Backordering is not allowed in this model. To achieve the minimum total cost (ordering cost + holding cost), how many times the company should place ordersin a year? In each order, how many products should be ordered? What is the total cost in a year? Watch Watch these two videos: . Video 1: Lot Sizing. Video 2: Lot sizing - heuristics QuestionsQ1 (2 marks) Given that the total demand of the whole year is 10,000 products, suppose the company is going to use the EOQmodel for the accumulated demand of one year (10,000). In other words, ignore the monthly demand. Compute: