Introduction to Materials Management 8th Edition by Steve Chapman ,Tony Arnold ,Ann Gatewood ,Lloyd Clive

Exercise 1

Carl's Computers
There was no question about Carl's genius. Seven years ago he decided to enter the competitive nightmare that the personal computer business had become. Although on the surface that appeared to be a rather non-genius-like move, the genius came in the unique designs and features that he developed for his computer. He also figured a way to promise delivery in only two days for the local and regional market. Other computer makers also had rapid production and delivery, but they were national competitors, and the delivery time from distant locations generally made Carl able to out compete them on delivery. Carl soon had a loyal following, especially among the many small businesses in the area. Not only could Carl deliver quickly, but he also had very rapid service to deal with any technical problems. That service feature became critical for the local businesses whose very livelihood depended on the computers, and soon that rapid service capability became more important than the initial product delivery. Since most of these businesses were fairly small, they could not afford to have their own in-house computer experts, so they depended heavily on Carl.
Assignment
Using the data on the two part numbers given, provide a comprehensive evaluation of the ordering policies. Compare the present annual average cost with the cost of using a system such as EOQ, and discuss any other order policies as appropriate.