Demand (D) = 2,000 units/year, normally distributed Standard deviation of weekly demand = 3 units Ordering cost = $ 50 /order Holding cost (H) = $ 6.00/unit per year Desired service level = 90 % Lead time (L) = 5 weeks If the company uses a periodic review system, what should the review period (P) be (in weeks)? Pick the closest ansv

Demand (D) = 2,000 units/year, normally distributed Standard deviation of weekly demand = 3 units Ordering cost = $ 50 /order Holding cost (H) = $ 6.00/unit per year Desired service level = 90 % Lead time (L) = 5 weeks If the company uses a periodic review system, what should the review period (P) be (in weeks)? Pick the closest ansv

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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A golf specialty wholesaler operates 50 weeks per year. Management is trying to determine an inventory policy for its 1-irons, which have the following characteristics:Demand (D) = 2,000 units/yearDemand is normally distributedStandard deviation of weekly demand = 3 unitsOrdering cost = $40/orderAnnual holding cost (H) = $5/unitsDesired cycle-service level = 90 percentLead time (L) = 4 weeksa. If the company uses a periodic review system, what should P and T be? Round P to the nearest week.b. If the company uses a continuous review system, what should R be?
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?
A building materials stockist obtains its cement from a single supplier. Demandfor cement is reasonably constant throughout the year. Last year the company sold 2 000tonnes of cement. It estimates the costs of placing an order at around 25 MU each timean order is placed and charges inventory holding at 20% of purchase cost. The companypurchases cement at 60 MU per tonne.a) How much cement should the company order at a time?b) Instead of ordering EOQ, why not a order convenient 100 tonnes? Please mention formulas and do it in detail so I can understand.
Hayes Electronics assumed with certainty that the ordering cost is $450 per order and the inventory carrying cost is $170 per unit per year. However, the inventory model parameters are frequently only estimates that are subject to some degree of uncertainty. Consider four cases of variation in the model parameters: (a) Both ordering cost and carrying cost are 10% less than originally estimated, (b) both ordering cost and carrying cost are 10% higher than originally estimated, (c) ordering cost is 10% higher and carrying cost is 10% lower than originally estimated, and (d) ordering cost is 10% lower and carrying cost is 10% higher than originally estimated. Determine the optimal order quantity and total inventory cost for each of the four cases. Prepare a table with values from all four cases and compare the sensitivity of the model solution to changes in parameter values.
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 cost
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.
Hayes electronics assumed with certainty that the ordering cost is $450 per order and the inventory carrying cost is $170 per unit per year. However, the inventory model parameters are frequently only estimates that are subject to some degree of uncertainty. Consider four cases of variation in the model parameters as follows: (a) both ordering cost and carrying cost are 10% less that originally estimated, (b) both ordering cost and carrying cost are 10% higher than originally estimated, (c) ordering cost is 10% higher and carrying cost is 10% lower than originally estimated, and (d) ordering cost is 10% lower and carrying cost is 10% higher than originally estimated. Determine the optimal order quantity and total inventory cost for each of the four cases. Prepare a table with values from all four cases and compare the sensitivity of the model solution to changes in parameter values.
Geox Ltd buys shoes from a supplier in Italy and sells them on to retailers in Australia. Geox Ltd currently uses an EOQ model to determine the number of shoes to send to order. The annual demand for shoes is approximately 45,600. The ordering cost is $55 per order. The annual cost of physically storing shoes is $8.75 per unit. The insurance on the inventory (shoes) cost is $4.25 per unit. The opportunity cost (annual ROI 25% x $30) is $7.50 per unit. The accountant of Geox Ltd, Richard Branson, recently attended a seminar on Just-in-Time (JIT) and is considering how the ideas of JIT differ from traditional techniques like EOQ and how they may help to manage inventory more efficiently. REQUIRED: A) Use the EOQ model to determine the optimal number of shoes per order. (show calculations) B) If it takes two weeks to receive an order, at what point should Geox Ltd reorder shoes? (show calculations) C) Geox Ltd has determined that demand may vary from the average by up to 25%. To handle…
Part 1 Sam's Pet Hotel operates 52 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $13.00 per bag. The following information is available about these bags: Demandequals=75 bags/week Orde costequals=$55.00/order Annual holding costequals=35 percent of cost Desired cycle-service levelequals=80 percent Lead timeequals=4 weeks (24 working days) Standard deviation of weekly demand equals=15 bags Current on-hand inventory is 320 bags, with no open orders or backorders. Part 2 a. Suppose that the weekly demand forecast of 75 bags is incorrect and actual demand averages only 50 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error? The costs will be ___ higher owing to the error in EOQ. (Enter your response rounded to two decimal places.)
Nationwide Auto Parts uses a periodic review inventory control system for one of its stock items. The review interval is 6 weeks, and the lead time for receiving the materials ordered from its wholesaler is 3 weeks. Weekly demand is normally distributed, with a mean of 100 units and a standard deviation of 20 units.a. What is the average and the standard deviation of demand during the protection interval?b. What should be the target inventory level if the firm desires 97.5 percent stockout protection?c. If 350 units were in stock at the time of a periodic review, how many units should be ordered?
Anglo American Platinum uses ABC analysis as an inventory categorisation method. The current inventory ordering policy is to order 10 000 units of an ‘A’-item inventory when the level falls to 4 500 units. Forecast demand to meet production requirements during the next year is 62 500 units. The cost of placing and processing an order relating to this inventory item is R250, while the cost of holding a unit in store is R50 per unit per year. You anticipate that both costs will be constant during the next year. Orders are received two weeks after being placed with the supplier. Assume a 50-week year and that demand is constant throughout the year. Using a quantitative analysis, appraise the optimality of the current ordering policy of the ‘A’-item inventory (Show all calculations).
Custom Computers, Inc. assembles custom home computersystems. Th e heat sinks needed are bought for $12 each and areordered in quantities of 1300 units. Annual demand is 5200 heatsinks, the annual inventory holding cost rate is $3 per unit, andthe cost to place an order is estimated to be $50. Calculate thefollowing:(a) Average inventory level(b) Th e number of orders placed per year(c) Th e total annual inventory holding cost(d) Th e total annual ordering cost(e) Th e total annual cost