Excersise 7-2: Harley Davidson

Harley has decided to implement Just In Time (JIT) at the motorcycle assembly plant. As part of this initiative it has reduced the number of engines loaded on each truck to 100. If each truck trip still costs $1,000, how does this decision impact annual costs at Harley? What should the cost of each truck be if a load of 100 engines is to be optimal for Harley?

Part I Inputs Demand, R = Fixed cost per order, S = Cost per engine, C = Holding cost, h = Order quantity Outputs # of orders per year Annual Order Cost Cycle inventory (units) Annual Holding Cost Total Inventory Cost

$ $

109,500 (assuming 365 operating days) 1,000 500 20% 100

$ $

1,095 1,095,000 50 5,000 1,100,000

Part II Inputs Demand, R = Fixed cost per order, S = Cost per engine, C = Holding cost, h = EOQ Outputs Fixed cost per order, S = # of orders per year Annual Order Cost Cycle inventory (units) Annual Holding Cost Total Inventory Cost

$ $

109,500 (assuming 365 operating days) 1,000 500 20% 100

4.57 1,095 5,000 50 5,000 10,000

$ $

CR - 6/14/2012 7:46 AM

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100424821.xls.ms_office - VALUES

Excersise 7-2: Harley Davidson

Harley has decided to implement Just In Time (JIT) at the motorcycle assembly plant. As part of this initiative it has reduced the number of engines loaded on each truck to 100. If each truck trip still costs $1,000, how does this decision impact annual costs at Harley? What should the cost of each truck be if a load of 100 engines is to be optimal for Harley?

Part I Inputs Demand, R = Fixed cost per order, S = Cost per engine, C = Holding cost, h = Order quantity Outputs # of orders per year Annual Order Cost Cycle inventory (units) Annual Holding Cost Total Inventory Cost

=300*365 1000 500 0.2 100

(assuming 365 operating days)

=C13/C17 =C20*C14 =C17/2 =C15*C22*C16 =C21+C23

Part II Inputs Demand, R = Fixed cost per order, S = Cost per engine, C = Holding cost, h = EOQ Outputs Fixed cost per order, S = # of orders per year Annual Order Cost Cycle inventory (units) Annual Holding Cost Total Inventory Cost

=300*365 1000 500 0.2 100

(assuming 365 operating days)

=((C34^2)*C33*C32)/(2*C30) =C30/C34 =C39*C37 =C34/2 =C32*C41*C33 =C40+C42

CR - 6/14/2012 7:46 AM

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100424821.xls.ms_office - FORMULAS