The forecasted values are derived from the figures provided for the year sep 1996 to August 1997. The demand on the other hand is derived from the historic MAD and the forecast figures for the specified time range. The plotted graph clearly depicts that the demand for the wine bottles is fairly steady for the whole year from September 1996 to August 1997, except for the months of November and December, with only minor fluctuation taking place in other months. November and December peak in demand for the wine bottles with the demand going as high as 26,000 bottles approximately. While the average median for the demand is 15,000 bottles for the rest of the months excluding November and December,
The inventory plan under the fixed order quantity assumes that a fixed number of units would be orders and managed in the inventory at all times around the year. Under the inventory plan the order quantity is fixed for the whole year and based on the information provided the value for December has been assumed as the fixed order quantity. As per the fixed order inventory plan the holding costs stand at $10,527, with the cost of safety stock at $6,608 for a 99 percent service level and the ordering cost amounting to $8,820. The total cost of the inventory plan stands at $25,955
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