Inventory Analysis of Woodstock Appliance Company

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Inventory Analysis of Woodstock Appliance Company

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Executive Summary Woodstock Appliance Company is in need of an inventory analysis that will result in a simple inventory policy. The inventory policy must be effective in minimizing total costs, which are dependent on inventory cost and warehouse costs. These numbers are dependent on variables such as order quantity and holding cost rates. The company desires a simple policy, therefore request integer order cycles. This leads us to concluding that Woodstock Appliance Company should proceed with order cycles of 1, 1, 1, and 3 for Products 1, 2, 3, and 4, respectively. The order quantities will be 97, 193, 577, and 18, rounding up to avoid stock outs. These values are most desirable, not because they minimize costs absolutely, but because they minimize costs in the most simple way. Thus, total costs for the company will equal approximately $139060.

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Table of Contents

Title Page…………………………………..i
Executive Summary……………………….ii
Table of Contents………………………....iii
Introduction, Problem, Purpose…………...1
Findings…...………………………………2
Conclusion………………………………...3
References…………………………………6
Appendices………………………………...7

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Introduction, Problem, and Purpose
The Woodstock Appliance Company carries four products. The annual demands for these products range from 300/year for a high-end vacuum cleaner to 30,000/year for a table fan. The order costs, holding costs, and purchase costs, as well as how much space each product occupies, are know for each of the four products. The numerical information is summarized in the following table.

Product | 1 | 2 | 3 | 4 | Annual Demand | 5,000 | 10,000 | 30,000 | 300 | Order Cost | $400 | $700 | $100 | $250 | Holding Cost Rate | 10% | 10% | 10% | 10% | Purchase Price | $500 | $250 | $80 | $1,000 | Space/Unit | 12 | 25 | 5 | 20 |

Woodstock rents a