SMRP BoK Review Workbook

Storeroom Economics

Scenario: A bearing costs $25 and has a usage of 20 per year. The cost of ordering is $75 per PO and there is a

carrying cost of 24%.

Situation 1:

Bearing is ordered frequently

with a low order quantity.

✓ With a min of 2 and a max of

4, the bearing is ordered

approx. 7x per year

✓ The carrying cost is low at

$18 per year, but the

ordering cost is high at $500

per year, resulting in an

ownership cost of $518 per

year

Situation 2 :

Bearing is ordered infrequently

with a high order quantity.

✓ With a min of 30 and a max

of 40, the bearing is ordered

0.6x per year

✓ The carrying cost is high at

$210, but the ordering cost is

low at $43 per year, resulting

in an ownership cost of $253

per year

Situation 3 :

Bearing is ordered using an

Economic Order Quantity (EOQ).

✓ With a min of 1 and a max of

23, the bearing is ordered

approx. 1.6x per year

✓ The carrying cost is $72, and

the ordering cost is $125 per

year, resulting in an

ownership cost of $197 per

year