Question

You work at DeliWine, a wine retailer. DeliWine sources one of their best selling wines, BeauRoux, from a France wine distributor. The cost of placing an order is $ 513 and the annual holding cost rate of DeliWine is 14 %. The lead time is 2 weeks and DeliWine only pays for the goods when the shipment arrives at their distribution center. Assume that there are 48 weeks in a year.

The annual demand for BeauRoux is very stable at 34954 bottles. The costs of BeauRoux is $ 78 per bottle.

1) What is the optimal order quantity of BeauRoux (in bottles)?

Round your answer up to the nearest integer.

2)Using the order quantity from Part 1.1 (rounded value), how many weeks are there between each optimal order quantity of BeauRoux?

Write your answer with two decimal numbers.

3) Based on the exceptionally stable demand, you are assuming that demand is deterministic in your model. What are the estimated annual costs of DeliWine for this policy? If needed, use the rounded values from Part 1.

Annual pipeline inventory cost. Keep in mind that DeliWine only pays for the goods when the shipment arrives at their distribution center.

Round your answer to the nearest integer.

4)Annual purchasing cost?

5)Annual ordering cost?

6)Annual average cycle stock cost?

7) BeauRoux is packed in a special bottle that requires very careful handling. For large deliveries, some extra employees are needed to help unpack. You pointed to your manager that there is an extra handling cost of $0.34 for each bottle of BeauRoux if the order for BeauRoux is larger than 409 bottles. (You can consider that each bottle costs $0.34 more if the order for BeauRoux is larger than 409.)

What is the order size that will minimize total costs considering the extra handling costs?

Answer 1