Andy's Job Shop buys two parts (Tegdiws and Widgets) for use in its production system from two different suppliers. The parts are needed throughout the entire 52-week year to assemble Uediracs for sale. Tegdiws are used at a relatively constant rate but the use of Widgets vary with demand. Andy wants to improve his inventory management system and use either a "P" system or a "Q" system. What are the advantages and disadvantages of each system in this application and what information is needed to choose between them?
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- Custom Computers, Inc. assembles custom home computer systems. The heat sinks needed are bought for $12 each and are ordered in quantities of 1300 units. Annual demand is 5200 heat sinks, the annual inventory holding cost rate is $3 per unit, and the cost to place an order is estimated to be $50. Calculate the following: (a) Average inventory level (b) The number of orders placed per year (c) The total annual inventory holding cost (d) The total annual ordering cost (e) The total annual costPetromax Enterprises uses a continuous review inventorycontrol system for one of its SKUs. The following informationis available on the item. The firm operates 50 weeks in a year.Demand = 50,000 units>yearOrdering cost = $35>orderHolding cost = $2>unit>yearAverage lead time = 3 weeksStandard deviation of weekly demand = 125 unitsa. What is the economic order quantity for this item?b. If Petromax wants to provide a 90 percent cycle-servicelevel, what should be the safety stock and the reorder point?The Suregrip Tire Company carries a certain type of tire with the following characteristics:Average annual sales = 600 tiresOrdering cost = $40 per orderCarrying cost = 25 percent per yearItem cost = $50 per tireLead time = 4 daysStandard deviation of daily demand = 1 tirea. Calculate the EOQ.b. For a Q system of inventory control, calculate the safety stock required for service levels of 85, 90, 95, 97, and 99 percent. excelc. Construct a plot of total inventory investment versus service level.d. What service level would you establish on the basis of the graph in part c? Discuss.
- Daily demand for a certain product is normally distributed with a mean of 100 and a standarddeviation of 15. The supplier is reliable and maintains a constant lead time of 5 days.The cost of placing an order is $10 and the cost of holding inventory is $0.50 per unit peryear. There are no stockout costs, and uni lled orders are i lled as soon as the order arrives.Assume sales occur over 360 days of the year.Your goal here is to i nd the order quantity and reorder point to satisfy a 90 percentprobability of not stocking out during the lead time.a. What type of system is the company using?b. Find the order quantity.c. Find the reorder point.It’s your responsibility, as the new head of the automotive section of Nichols Department Store, to ensure that reorder quantities for the various items have been correctly established. You decide to test one item and choose Michelin tires, XW size 185 x 14 BSW. A perpetual inventory system has been used, so you examine this, as well as other records, and come up with the following data. Cost per tire $55 each Holding cost 15 percent of tire cost per year Demand 1,180 per year Ordering cost $ 36 per order Standard deviation of daily demand 7 tires Delivery lead time 8 days Because customers generally do not wait for tires but go elsewhere, you decide on a service probability of 95 percent. Assume the…Your firm uses a continuous review system and operates 52 weeks per year. One of the Stock-Keeping Units (SKUs) has the following characteristics:Demand = 20000 units/year = 385 units/weekOrdering cost = $40/orderHolding cost = $2/unit/yearService level = 95 percentz=1.65Lead time = 2 weeksDemand is normally distributed, with a standard deviation of weekly demand of 100 units. a)Calculate the item's EOQ. b)Find the safety stock and reorder point that provide a 95 percent service level. c)For these policies, what are the annual costs of (i) holding the cycle inventory and (ii) placing orders?
- It takes approximately 2 weeks (14 days) for an order ofsteel bolts to arrive once the order has been placed. The demandfor bolts is fa irly constant; on the average, the manager, MichelleWu, has observed that the hardware store sells 500 of these boltseach day. Because the demand is fairly constant, Michelle believesthat she can avoid stockouts completely if she orders the bolts atthe correct time. What is the reorder poin t?Your firm uses a continuous review system and operates 52 weeks per year. One of the SKUs has the following characteristics.Demand 1D2 = 20,000 units/yearOrdering cost 1S2 = $40/orderHolding cost 1H2 = $2/unit/yearLead time 1L2 = 2 weeksCycle@service level = 95 percentDemand is normally distributed, with a standard deviation of weekly demand of 100 units.Current on-hand inventory is 1,040 units, with no scheduled receipts and no backorders.a. Calculate the item’s EOQ. What is the average time, in weeks, between orders?b. Find the safety stock and reorder point that provide a 95 percent cycle-service level.Petromax Enterprises uses a continuous review policy to manage the inventory for one of its SKUs. The following information is available on the item. The firm operates 50 weeks in a year. Demand = 90,000 units/year Ordering Cost = $60/Order Holding Cost = $3/Unit/Order Lead Time = 10 weeks Standard Deviation of Weekly Demand = 200 units Suppose due to some recent changes to the target service level, they have determined the reorder point to be 20,000. If the inventory position of this SKU is currently 19,600, how many units should they order? (Round your answer to the nearest whole number, if it has decimals. Input 0 if they should not order now.)
- Murphy & sons is a company that has contracts to repair pavements for a number of London Boroughs. Demand for its services is constant throughout the year. It uses 48,000 paving slabs each year. The cost of placing an order for paving slabs is £75 and the holding cost per unit of inventory is 45p pa. Suppliers are very reliable and no buffer stock is kept. Required: Calculate i) the batch size at which inventory costs will be minimised; ii) the number of orders that will be placed each year; and iii) the total inventory costs per annum. Critically discuss the limitations of the Economic Order Quantity model as a way of managing stock.ABC Corporation resells one type of candle. It has 250 working days. Each day, it sells an average of 500 boxes but maysometimes sell a maximum of 600 boxes. The supplier takes an average of 5 days to deliver the order. During busier times, thesupplier may take 7 days.Based on ABC’s records, ordering cost average P400 per order. Storage cost per box average P5 per year. There is also anopportunity cost of 1% per year for every peso invested in inventories. Each box of candles costs P450. If ABC would continue its current inventory management policy, it would keep 10,000 boxes as safety stock and order ten-days-worth of inventory. (C) Reorder Point and Economic Order Quantity19. What would the average number of boxes be if the safety stock from Part A was kept and the EOQ from Part Bwas followed? Round off to two decimal places.20. How much would the carrying cost for the year be based on item 19?21. How much would the total inventory related (ordering plus carrying) costs be if the…A company operates for 50 weeks a year and uses a fixed quantity inventory system for one of its most important items. Below are the characteristics for the item: Weekly demand follows normal distribution: mean of 400 units and standard deviation of 100 units Order Cost = $40 per order Annual Holding cost = $2/unit/year Desired service level = 95% (z = 1.645) Lead Time = 4 weeks Economic Order Quantity (EOO) = 894 units Now suppose that the management is considering switching to a fixed time inventory system where the time between orders is 2 weeks. Everything else being the same as the information provided for the original problem, which system (Q or P system) is likely to have more safety stock? Please explain why.