:-REPORTS ON INVENTORY MODEL:-

COURSE CODE: MATH 301

COURSE TITLE: OPERATION RESEARCH

_________________________________________________________________

SUBMITTED TO
Assistant Professor, Mahbub Parvez
Department of Business Administration (DIU),
Faculty of B&E, DIU

SUBMITTED BY
Full Name List ID List Signature
Arif Mohammed Khan ID # 081-11-146
Mazharul Islam ID # 072-11-1955
Bithi Nahar ID # 083-11-545
Arif Hossain ID # 083-11-532

17TH BATCH; SECTION: [A]

DATE OF SUBMISSION
DECEMBER 30, 2010

DAFFODIL INTERNATIONAL UNIVERSITY

December 30th, 2010
Assistant Professor, Mahbub Parvez
Operations Research
Daffodil International University (DIU)

Re: Inventory Model of Ripon Store

Dear Sir,

It is a pleasure to submit the term paper on the topic “Inventory Model of Ripon Store”,
as a partial requirement of the course “Operations Research”. We thank you for allowing
us the opportunity to do the term paper on this topic.

This term paper attempts to look into the point of how much the Ripon Store should order
and when to order and as well as to balancing in between of demand and supply.

We will always be available for any supplementary interpretation or clarification that

may require. This report definitely gives us an exceptional experience that will be of use
in the future.

We hope that our analysis will aid you in making the concrete decision and live up to
your expectations.

Sincerely Yours,
Arif Mohammed Khan ID # 081-11-146
Mazharul Islam ID # 072-11-1955
Bithi Nahar ID # 083-11-545
Arif Hossain ID # 083-11-532
Preface

A business or an industry usually maintains a reasonable inventory of goods to ensure

smooth operation. Traditionally inventory is viewed as a necessary evil-too little of it
causes costly interruptions, too much results in idle capacity. The inventory problem
determines the inventory level that balances the two extreme cases.

In this term paper attempts to look into the point of how much the Ripon Store should
order and when to order and as well as to balancing in between of demand and supply
and generating higher profits with less cost. We hope that our analysis will aid you in
making the concrete decision and live up to your expectations.
Acknowledgement

At this point we would specially like to thank those who had made it possible for us to
prepare our term paper. Without their cooperation this work would have been a lot
harder. Here we want to express our gratitude to Ripon Store’s owner, Ripon Ahmed to
giving us information about his business properly.

We want to express our thanks to our Course Lecturer, Assistant Professor, Mahbub
Parvez, who had given us this report and helped us in all possible ways and directed,
guided us properly in completing our report. His continuous support and re-enforcement
has encouraged us to do the term paper.

Introduction
Ripon Store is a medium size store which was established in 1995. Ripon Ahmed is the
founder and owner of the Ripon Store. It is situated Kazipara Bazar, Mirpur, and Dhaka.
They have no outside labor; the business is based on family labor. The family member of
Mr. Ripon (his three brothers) is used to maintain this business store. The capital of the
Ripon Store is Tk. 15, 00,000. Ripon Ahmed has the TCB license, so he import six (6)
types of rice from government war-house and sells the rice in local market with
reasonable price.

Objective of the Report

The objective of the term paper is to implementing Inventory Model to Ripon Store and
find out that how much they should order and when to order and as well as to balancing
in between of demand and supply.

Finding and Analysis

 Ripon Store makes profits & selling more goods. So that, there profits (per goods)
are short but they adjust their cost & revenue and profit by selling huge goods.
 Ripon Store’s total holding cost is Tk. 10020. But, average holding cost per
products is Tk. 1670.
 Ripon Store runs by owner’s family member. So that they have no labor cost
 We analyses their six (6) product and we find that they have average demand is 6
tons rice.
 Here, we find that average lead time is 20 days.
Inventory Model’s Math: (Based on Ripon Store’s
Information)

Type No: 01 (Miniket @ 46 tk)

Purchasing Cost = Tk. 18000 per ton

Demand: (Per Unit) D = 6 tons/ day
Ordering Cost: (Taka) K = 50000 per order
Holding Cost: (Taka per unit) h = 1670 / per month = 1670/30 day = 55.67 days
Lead Time, L = 20 Days

1. y =

y= = = 103.816

2. to = = = 17.30 days

Where, Le = Le - nto
n = largest integer
= 20 – 1 × 17.30
= 20 – 17.30 = L.I
= 2.7 days = L.I

The reorder point thus occurs when the inventory level drops to LeD = 2.7 × 6 = 16.2
tons

3. TCU = +
=
= 2889+2889
= Tk. 5778 / Days.
Type No: 02 (28 Chikon @ 39 tk)

Purchasing cost = Tk. 19000 per ton

Demand, D = 6 tons / day
Ordering cost, K = Tk. 55000 per order
Holding cost, h = 1670 per month = 1670/30 day = 55.67 days
Lead Time, L = 20 days

1. y = = = 108.88

2. to = = = 18.15 days

n = largest integer
Le = Le - nto = 20 – 1 × 18.15 = 20 – 18.15 = 1.85 days
L.I
L.I

Thus the reorder point occurs when the inventory level drops to LeD = 1.85×6 = 11.1
tons

3. TCU = +
=
= 3030+3030
= Tk. 6060 / days
Type No: 03 (Lota @ 41 tk)

Purchasing cost = Tk. 20000 per ton

Demand, D = 7 tons / day
Ordering cost, K = Tk. 50000 per order
Holding cost, h = 1670 per month = 1670/30 day = 55.67 days
Lead Time, L = 20 days

1. y = = = 112.13

2. to = = = 16.02 days

n = largest integer
Where, Le = Le - nto
= 20 – 1 × 16.02 = L.I
= 3.98 days = L.I

The reorder point thus occurs when the inventory level drops to LeD = 3.98 × 6 = 23.88

3. TCU = +
=
= 3121+3121
= Tk. 6242
Type No: 04 (Pari mota @ 38 tk)

Purchasing cost = Tk. 18000 per ton

Demand, D = 5 tons / days
Ordering cost, K = Tk. 40000 per order
Holding cost, h =1670 per month = 1670/30 day = 55.67 days
Lead Time, L = 20 days

1. y = = = 84.77

2. to = = = 16.954 days

Where, Le = Le - nto
n = largest integer
= 20 – 1 × 16.954
= 3.046 days = L.I
= L.I

Reorder point thus occurs when inventory level drops to LeD = 3.046× 5 = 15.23 tons

3. TCU = +
=
= 2359+2359
= Tk. 4718.
Type No: 05 (Amon @ 39 tk)
Purchasing cost = Tk. 20000 per ton
Demand = 6 tons/ days
Ordering cost = Tk. 60000 per order
Holding cost = 1670 per month = 1670/30 day = 55.67 days
Lead Time = 20 days

1. y = = = 113.72

2. to = = = 18.95 days

Where, Le = Le - nto
n = largest integer
= 20 – 1 × 18.95
= 1.05 days = L.I
= L.I

Reorder point thus occurs when inventory level drops to LeD = 1.05 × 6 = 6.3 tons

3. TCU = +
=
= 3165+3165
= Tk. 6330
Type No: 06 (Nagirsal @ 50 tk)

Purchasing cost = Tk. 18000 per tons

Demand = 6 tons / days
Ordering cost = Tk. 45000 per order
Holding cost = 1670 per month = 1670/30 day = 55.67 days
Lead Time = 20 days

1. y = = = 98.49

2. to = = = 16.415 days

Where, Le = Le - nto n = largest integer

= 20 – 1 × 16.415
= L.I
= 3.585 days
= L.I

Reorder point thus occurs when inventory level drops to LeD = 3.585 × 6 = 21.51 tons

3. TCU = +
=
= 2741+2741
= Tk. 5482
Conclusion

By using the Inventory Model for business, we can measure the demand per unit time and
supply of any business. When a business will understand how much they should order
and when they should order that will bring better profit to the business. Because of, the
cost of order units will be reduced and less order amount will take less amount of money.
The order will be required basis and time basis. To margin both things, business can earn
better profits.

Recommendation

 Ripon Store is a medium size general store. They should take loans to maximize
their business and earn more profit.
 They have no labor cost. To run the business successfully they should hire labor
for their business.
 In this case their supply is greater than demand. So, they should minimize the
supply to minimize inventory cost.
 Ripon store’s customer service is better than other store. So that the customer of
the Ripon Store’s are satisfied.
 They should improve their store’s environment to attract more customers.

References
 Ripon Store, Kazipara Bazar. Mirpur, Dhaka
Appendix

All data are collected of secondary data