Title
Operations Management - Inventory Management : Calculating EPQ - Example 2Creator
Bonnie Simmons and Memorial University. Centre for Innovation in Teaching and Learning (CITL)Description
Economic production quantity (EPQ) explores optimal quantity for production operations; it determines how much and when to produce. This video demonstrates how to calculate the EPQ using a practical example.
In this example you have a company about to begin production of a new product. The manager of the department that will produce one of the components for the product wants to know how often his machine will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units will be used daily in assembling the final product. The company operates five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at a cost of $300. inventory holding cost will be $10 per unit per year.
a. What production run quantity should be used to minimize total annual setup and holding cost?
b. What is the length of a production run (in days)?
c. During production, at what rate will inventory build up?
d. If the manager wants to run another job between runs of this item, and needs a minimum of 10 days per cycle of this job for the other work, will there be enough time?
Learning Design
Calculate the EPQ for the given example.Date Created
2017Format
Video/mp4Duration
06:03 minutes/seconds