case study low nail company

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Week 3 Case study Low Nail Co Dec 2020

Case-Low Nail Company After making some wise short-term investments at a race track, Chris Low had some additional cash to invest in a business. The most promising opportunity at the time was in building supplies, so Low bought a business that specialized in sales of one size of nail. The annual volume of nails was 2,100 kegs, and they were sold to retail customers in an even flow. Low was uncertain how many nails to order at any time. Initially, only two costs concerned him: order-processing costs, which were $60 per order without regard to size, and warehousing costs, which were $1.08 per year per keg space. This meant that Low had to rent a constant amount of warehouse space for the year, and it had to be large enough to accommodate an entire order when it arrived. Low was not worried about maintaining safety stocks, mainly because the outward flow of goods was so even. Low bought his nails on a delivered basis.

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Case 9-1: Low Nail Company Essay

CASE 9-1: LOW NAIL COMPANY Question 1: Using the EOQ methods outlined in chapter 9, how many kegs of nails should Low order at one time? The EOQ formula is: EOQ = √ 2 (annual use in units) (cost of placing an order) / annual carrying cost per item per year = √ 2 (2000) (60) / 2 = √ 120,000 = 345 kegs per order Note the 2 in the denominator. That is because, on average, the rented warehouse space is only half full, which, makes the average warehousing cost per keg be $2. Question 2: Assume all conditions in question 1 hold, except that Low’s supplier now offers a quantity discount in the form of absorbing all or part of Low’s order processing costs. For orders of 750 or more kegs of nails, the supplier will absorb all the order …show more content…

Question 4: Take into account the answer to question 1 and the supplier’s new policy outlined in question 2 and the warehouse’s new policy in question 3. Then determine Low’s new EOQ. The relevant table is as follows: Orders/year | Order size | Processing costs ($) | Warehousing costs ($) | Sum of processing and warehousing costs ($) | 1 | 2,000 | Free | 1,000 | 1,000 | 2 | 1,000 | Free | 500 | 500 | 3 | 667 | 90 | 334 | 424 | 4 | 500 | 120 | 250 | 370 | 5 | 400 | 150 | 200 | 350 | 6 | 334 | 180 | 167 | 347 | 7 | 286 | 210 | 143 | 353 | | | | | | The new EOQ, based on the above information, is 334. Question 5: Temporarily, ignore your work on questions 2, 3, and 4. Low’s luck at the race track is over; he now must borrow money to finance his inventory of nails. Looking at the situation outlined in question 1, assume that the wholesale cost of nails is $40 per keg and that Low must pay interest at the rate of 1.5% per month on the unsold inventory. What is his new EOQ? This answer can be done in tabular form as well, with the interest on inventory appearing as a new column. If one order is placed a year, the average inventory is 1,000 kegs, worth $40,000, with annual interest charges (1.5 x 12 = 18%) of $7,200. Other interest costs are calculated in a similar fashion, adjusted for average inventory. The relevant table is as follows:

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1) In this exercise, you viewed the settlement of costs to finished goods and manufactured output settlement. As noted in the exercise, each should be for $42,000.

Second, the manufacturing order costs for non-stocked items was calculated by dividing total manufacturing order costs for non-stocked items by the number of orders for non-stocked products. Non-stocked products have additional costs associated with processing orders that went above and beyond the costs associated with a stocked product. The third step involved determining what the S"A allocation factor would be for calculating the S"A volume related costs. This allocation factor would then be applied to manufacturing COGS. The fourth and final step involved the calculation of the operating profit based on backing out volume related costs from sales revenues followed by deducting S"A and manufacturing order costs from the resulting gross margin to arrive at a operating profit.

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Supplier A: EOQ = Square root of (2 x 1500 x $1,000) = S.R. of 3,000,000 = 209

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The strong smell in the air. The sound of a air filter. The wild and calm colors of nail polish you see on the tables and shelves. The feeling of helping a girl feel like she’s a queen. The passion to do good and help a girl get stuff off of her shoulder and give advice. These are the reasons I choose to be a Nail Technician. Currently I am a senior in high school, in the Nail-Tech program. Through this program, that I found my love for doing nails and helping people. Being a Nail Technician suits my ESFP personality, such as love being around people, being a practical worker and being easy to communicate with.

Good Greek Grill Inventory Management

The operations management problem that our group chosen to discuss about occurs at a small, family owned restaurant business called Good Greek Grill. Known best for their tasty greek food, the company’s primary problem is inventory management; trying to determine the order quantities and the method of lot sizing and when to order so the company doesn’t waste items with short life such as the dairy products that uses like yogurt and milk. In the past the store has had been throwing away large quantities of dairy products due to lack of forecasting the demand for dairy products as well as weak inventory planning methods from unqualified employees. As a result, Good Greek Grill (G3) asked our group to help them solve the problem since after getting a SOM class we are able to determine methods towards solutions of Operational Management problems. The solution can be found by getting to know what is the current reorder point and order quantity by using the EOQ (Economic Order Quantity) inventory model . Cost cutting is essential as the store doesn 't get enough customers that are interested in the dessert and coffee products that are offered in store. Yogurt is used in our dessert items which are the strawberry greek yogurt and the black

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Under a "just-in-case" or JIC practice where all components for a month's Flow Controller production will be purchased together, the total receiving and material handling costs will be only $14,000 (1/10 the cost). Some assumptions will be necessary for calculating an inventory storage and carrying cost charge. The total cost of flow controller components purchased each month is $88,000. Assume uniform production during the month so that the average inventory cost is $44,000 (50% x

Quantitative Practice Problems on GAP's Supply Chain Management

SUPPLY CHAIN MANAGEMENT CASE 2 Quantitative Practice Problems MSc12, 11 May 2004 Question 1. a) Which of the two products should the GAP carry at the stores and which at the central warehouse for the online channel? Khaki pants Information given : The mean μ 800 Standard deviation σ100 Cost$30,- Holding cost 25% Lead time 4 weeks Target cycle service level95% z-value 1,645 Safety stock Khaki pants Service level * σ * √( Lead time) 1,645 * 100 * √(4) Safety stock for Khaki pants = 329 Cost Khaki pants Holding cost * safety stock 0,25 * $30,- * 329 Total holding cost of Khaki pants is $2.467,50 Cashmere sweaters Information given : The mean μ 50 Standard deviation σ50 Cost$100,- Holding cost 25% Lead time 4 weeks Target cycle service

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Considering a constant and uniform demand, an EOQ (1) analysis was made to determine the optimal

Average Inventory at Cost is $1,000. Say you have gross profit margins of 20%. If you sell $5,000 per year of this product, you make 20% of that or $1,000 in gross profit.

Time Value of Money

For example, the opportunity cost of a single glass of beer is about $7.00. The generally accepted Opportunity Cost factor, including inflation, is 6.7. Therefore, that $1.00 glass of beer cost the buyer about $7.00 in future earnings.

Inventory and Total Holding Costs

Mabuhay Company Incorporated owns 50 grocery outlets scattered around the metro but has only one main warehouse where all the goods are stored prior to delivery. The current inventory policy of the company had been practiced for the past 15 years. It mandates the monthly reorder of stocks by the main warehouse, and charging the branches with the delivery cost and a 3% financing charge per month on their inventory

A review of the information provided to me has allowed me to calculate the profitability of each customer very precisely, and has let me form certain conclusions about the profitability of each of customer. Also, I noticed several cost and constraints for this warehouse:

Economic order Quantity model refers the inventory management system which helps to determine the optimum order quantity which minimizes its order and carrying cost. Here we show how much quantity they should buy to minimize their cost.

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Case 9-1: Low Nail Company Essay

CASE 9-1: LOW NAIL COMPANY Question 1: Using the EOQ methods outlined in chapter 9, how many kegs of nails should Low order at one time? The EOQ formula is: EOQ = √ 2 (annual use in units) (cost of placing an order) / annual carrying cost per item per year = √ 2 (2000) (60) / 2 = √ 120,000 = 345 kegs per order Note the 2 in the denominator. That is because, on average, the rented warehouse space is only half full, which, makes the average warehousing cost per keg be $2. Question 2: Assume all conditions in question 1 hold, except that Low’s supplier now offers a quantity discount in the form of absorbing all or part of Low’s order processing costs. For orders of 750 or more kegs of nails, the supplier will absorb all the order …show more content… Question 6: Taking into account all the factors listed in questions 1, 2, 3, and 5, calculate Low’s EOQ for kegs of nails. The relevant table is as follows: Orders/year | Order size | Processing costs ($) | Warehousing costs ($) | Interest costs ($) | Sum of processing, warehousing, and interest costs ($) | 1 | 2,000 | Free | 1,000 | 7,200 | 8,200 | 2 | 1,000 | Free | 500 | 3,600 | 4,100 | 3 | 667 | 90 | 334 | 2,405 | 2,829 | 4 | 500 | 120 | 250 | 1,800 | 2,170 | 5 | 400 | 150 | 200 | 1,440 | 1,790 | 6 | 334 | 180 | 167 | 1,203 | 1,550 | 7 | 286 | 210 | 143 | 1,030 | 1,383 | 8 | 250 | 240 | 125 | 900 | 1,265 | 9 | 223 | 540 | 112 | 807 | 1,459 | The new answer, based on the above information, is 250 Show More

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