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CHAPTER 12

INVENTORY CONTROL MODELS

Internet Case Study: Professional Video Management

1. To determine the reorder points for the two suppliers, daily demand for the videotape systems must be

determined. Since each video system requires two videotape systems that are connected to it, the demand

for the videotape units is equal to twice the number of complete systems.

The demand for the complete video system appears to be relatively constant and stable. The monthly

demand for the past few months can be averaged, and this value can be used for the average monthly

For Kony, the reorder point can be computed in the same manner. Kony’s lead time in days is 10 days (=

2 × 5). Therefore, the reorder point for Kony is 8,000 (= 800 × 10).

2. To make a decision concerning which supplier to use, total inventory cost must be considered for both

Toshiki and Kony. Both companies have quantity discounts. Because there are two suppliers, we make

3. Each alternative that Steve is considering would have a direct impact on the quantity discount model

and the results. The first strategy is to sell the components separately. If this is done, the demand for

videotape systems could change drastically. In addition to selling the videotape units along with the

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