Operations Management
Assignment No. 3
Here I have chosen to monitor the bike of my friend to get an idea of the inventory management system in the day to day life. I have retrieved his data from last January and February to get some data factual for analysis. I have converted them to an excel sheet and have calculated the EOQ. Here from the calculation I have found that the frequency of refilling the petrol should be 8 times for 400 km whereas the actual filling was done for 6 times.
From my point of view I would say that it was a fixed reorder quantity model, in which when the indicator reaches to show empty tank bike would fall into reserves and my friend would rush to fill petrol.
Here I have assumed that whenever he finds the indicator at reserves he fills the tank, on the other hand he was having some quantity of petrol in the tank before 29th December 2012, retrieving data for which was impossible cause of unavailability of bills. So the modeling is involving the error for this much quantity of fuel in the tank and maybe that’s the only reason of deviation from 8 times to 6 times.
Here I have assumed that within the range of 4 km he is getting the petrol pump and he’s filling petrol from that pump on an average but that location for an ease of the calculation I have kept constant. Here that location is kept constant because of one more reason that, maximum time the petrol being filled from that pump only as a habit of checking the fuel before going to any outing.
On the other hand the cost of reordering is calculated taking into account the quantity of fuel remained reserve in the safety tank, which in case of the splendor is 1 liter and thus the ordering cost comes as 1.70 which multiplied by the 4 km average as the lead time to find the nearest petrol pump gives me the average ordering cost as 7 rs.
The holding cost here would be 74 rs on an average as the reserves is keeping one liter as the safety stock in the tank.
As I discussed above the EOQ is giving somewhat nearer answer in the practicality but here my friend is having a habit to fill the petrol on the basis of requirement if someone is filling the tank full on the first day of the salary and then the calculation is done for that kind of scenario the EOQ won’t be helpful. Looking at the price volatility of the petrol many people is using the later technique to immune themselves from price deviation at some level, especially those who are having the constant usage for a constant distance daily do use this strategy.

Thank You