Comparing Old and New EOQs We added in labor cost of three idle part-time when line-down, so the unit cost for each SKU increases a little bit. Higher unit cost lead to lower EOQ. As a result, we can see the reduction in order sizes. The new EOQ for each SKU decrease 3 or 4 than the old EOQ and the new ROP remained the same as the old ROP.
Evaluation of the scheduling method Jack and Josh Used In general, the scheduling method that Jake and Josh are using is to predict what the demand quantity for each item will be between runs. In order to predict the demand, they see what the demand was the previous month by using the data from the monthly sales summary for reference. And then, based on last year’s monthly sales, they make some adjustments by adding a safety factor to offset variance between sales in May and July. In addition, they also take into account the inventory on hand and schedule enough cases to be produced to last until the next scheduled run. In short, the order which will be input into the next run of the schedule is:
Order= (Forecasted Demand next 4 weeks) + (Safety Stock)-(Inventory on hand)
This estimate is basically a combination of the monthly forecasts. Speaking of demand forecast, even though present demand may be quite different from the past history, considering about both recent months and annual sales variances would help them determine annual and seasonal fluctuations. Sales forecasting refers to predicting future demand. Thus, when looking at the past months, they could analyze the driving patterns behind the demand. However, the EOQ model assumes steady demand of a business product and immediate availability of items to be re-stocked. It does not account for seasonal or economic fluctuations.