Optimizing Fuel Order and Inventory Management for the Metropolitan Bus Company
(a) What is the optimal order quantity for MBC?
10000 Correct: Your answer is correct.
(b) How frequently should MBC order to replenish the gasoline supply?
1 order Correct: Your answer is correct.
Per month Correct: Your answer is correct.
(c) Should MBC consider expanding the capacity of its storage tanks?
The maximum inventory is incorrect: Your answer is incorrect.
MBC does not need to expand its storage tanks. Correct: Your answer is correct.
(d) What is the reorder point (in gallons)?
Incorrect: Your answer is incorrect.
The optimal order quantity for MBC is 10,000 gallons of diesel fuel.
MBC should order fuel once a month to replenish their supply. The storage tanks have a capacity of 12,500 gallons, which is sufficient for their needs.
The reorder point is the level of inventory at which MBC should place a new order, and is calculated by multiplying the lead time by the average daily usage and adding a safety stock. The reorder point for MBC is 4,000 gallons ((10 days x 300 days x 400 gallons per day) + 1,200 gallons safety stock).
Therefore, MBC should order 10,000 gallons of fuel once a month to maintain their inventory level and ensure they have enough fuel to operate their buses. They do not need to expand their storage tanks as they have enough capacity to meet their needs.
Managing fuel order and inventory is crucial for the Metropolitan Bus Company (MBC) to ensure smooth operations and cost-effectiveness. By determining the optimal order quantity and reorder point, MBC can efficiently manage their fuel supply and storage.
With an annual fuel usage of 120,000 gallons and buses operating 300 days a year, MBC's optimal order quantity of 10,000 gallons ensures they have enough fuel without excessive holding costs. Ordering once a month at this quantity helps MBC replenish their fuel supply in a timely manner.
Considering the storage tanks' capacity of 12,500 gallons, MBC does not need to expand their storage tanks. This ensures they can effectively store the required amount of fuel without additional expenses.
The calculation of the reorder point at 4,000 gallons helps MBC determine when to place a new order to maintain a sufficient level of inventory. By incorporating a safety stock, MBC can account for any unexpected fluctuations in fuel demand.
Overall, optimizing fuel order quantity, frequency, and storage capacity enables the Metropolitan Bus Company to streamline their operations and ensure they have a reliable fuel supply for their buses.