Compare the established EOQ/ROP procedure(described in case Exhibit 2) with the one that Jake and Josh are using. Which system do you prefer? What improvements do you recommend?

EOQ means Economic Order Quantity

Reorder point means ROP

Explanation:

EOQ means Economic Order Quantity is total units of inventory that a company should purchase so as to minimize the total costs of inventory which are holding costs, order costs, and shortage costs.  

The reorder point (ROP) is the level of inventory that calls for replenishment of that stock. That is, the lowest point a company can go on a particular stock before ordering .

I prefer and would recommend ordering optimal order quantity the point at which holding cost equals ordering cost  at the reorder level= safety stock +(usage rate+ lead time)

Holding cost=Average inventory level*Holding cost

Ordering cost= Average number of order* ordering cost

Safety stock is stock held in excess of expected demand

Usage rate is an estimate rate of usage

Lead time is time between placing an order and receiving it.