NSU MGT 314 (Supply Chain/ Production Management), Few Questions and answers
Q-1: The purchasing agent for a company that assembles and sells air-conditioning equipment in a Latin American country noted that the cost of compressors has increased significantly each time they have been reordered. The company uses an EOQ model to determine order size. What are the implications of this price escalation with respect to order size? What factors other than price must be taken into consideration? * According to the book of operation management ( William J. Stevenson ), “EOQ models answer the question of how much to order, but not the question of when to reorder point (ROP) When order.” According to my logic, there could be multiple reasons. The first one could be frequent ordering in a short time, putting pressure on suppliers. So, to keep a balance between supply and demand, the suppliers charging higher in each next order. Because every supplier has a limited capacity, increasing capacity in a short time is not easy and most of the time so cos...
