Narragansett Yacht Corporation

1.) What is the EOQ for each supplier?
Supplier A: √(1500)(2)(1000)69 = 208.5 209 units
Supplier B: √(1500)(2)(500)69 = 147.44 148 units 2.) EOQ Assumptions?
First, we are assuming that all values are known and remain constant. This, at first, seems applicable, except that there is mention of sales becoming seasonal. We can, however, assume that the lead time will remain constant (with either of the supplier they choose). The next assumption is that the price remains constant. This we can apply up until the 2% discount also mentioned later. The next assumption is that the whole order is delivered at once, which can be applied. And finally, that we are only discussing one item, which I believe we can assume as it is not mentioned that the suppliers deal with anything other than winches. 3.) How many orders should be placed with Supplier A or Supplier B and when are their respective reorder points?
Supplier A: 1500209 = 7.18 times

Supplier B: 1500148 = 10.1 times

Reorder Times: d x L d= 1500360 = 4.1667

Supplier A: 4.1667 x 10 = 41.7 units
Supplier B: 4.1667 x 20 = 83.3 units

4.) Total Inventory Costs:
Supplier A: (0.23)(300)(104.5) + 1000 (1500/209) = $14,387.50

Supplier B: (0.23)(300)(74) + 500 (1500/148) = $10,173.56

With the information developed so far, it would appear that Supplier B is the choice to make.

5.) Safety Stock: a. With safety stock, what are the new TIC’s?
Supplier A: Safety Stock Carrying Costs: (0.23)(300)(75) = $5,175
New TIC: 14,387.50 + 5,175 = $19,562.50

Supplier B: Safety Stock Carrying Costs: (0.23)(300)(150) = $10,350
New TIC: 10,173.56 + 10,350 = $20,523.56 b. Reorder Points:
Supplier A:
75 + (41.7/2) = 95.85 so 95 units

Supplier B:
150 + (83.3/2) = 191.65