Example 1: The Aladdin Carpet Store has a customer demand that is normally distributed with an average daily demand of 30 meters and a standard deviation of 5 meters per day. The lead time for receiving a new order of carpet is 10 days. The store wants a service level of 95%, representing a probability of stockout equal to 5%. 1. What size of safety stock should the company keep ? 2. What is the reorder point?

Example 1: The Aladdin Carpet Store has a customer demand that is normally distributed with an average daily demand of 30 meters and a standard deviation of 5 meters per day. The lead time for receiving a new order of carpet is 10 days. The store wants a service level of 95%, representing a probability of stockout equal to 5%. 1. What size of safety stock should the company keep ? 2. What is the reorder point?

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Description: 69DId> Part 2. Questions 2-5 X +nmzm/OneDrive/ % /Continuous%20Review%20Model.pdfFixed Order Quantity modelExample 1:The Aladdin Carpet Store has a customer demand that is normallydistributed with an average daily demand of 30 meters and astandard d

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter3: Introduction To Optimization Modeling

Section3.8: A Multiperiod Production Model

Problem 22P

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Forrest and Dan make boxes of chocolates for which the demand is uncertain. Forrest says, “That’s life.” On the other hand, Dan believes that some demand patterns exist that could be useful for planning the purchase of sugar, chocolate, and shrimp. Forrest insists on placing a surprise chocolatecovered shrimp in some boxes so that “You never know what you’ll get.” Quarterly demand (in boxes of chocolates) for the last 3 years follows: Quarter Year 1 Year 2 Year 3 1 2 3 4 3,000 1,700 900 4,400 3,300 2,100 1,500 5,100 3,502 2,448 1,768 5,882 Total 10,000 12,000 13,600 a. Use intuition and judgment to estimate quarterly demand for the fourth year.b. If the expected sales for chocolates are 14,800 cases for year 4, use the multiplicative seasonal method to prepare a forecast for each quarter of the year. Are any of the quarterly forecasts different from what you thought you would get in part (a)?
At Dot Com, a large retailer of popular books, demand isconstant at 20,400 books per year. The cost of placing anorder to replenish stock is $35, and the annual cost of holdingis $6 per book. Stock is received 5 working days after an orderhas been placed. No backordering is allowed. Assume 250working days a year.a. What is Dot Com’s optimal order quantity?b. What is the optimal number of orders per year?c. What is the optimal interval (in working days) betweenorders?
A distributor of large appliances needs to determine the order quantities and reorderpoints for the various products it carries. The following data refer to a specii c refrigeratorin its product line:Cost to place an orderHolding costCost of refrigeratorAnnual demandStandard deviation of demand during lead timeLead time$10020 percent of product cost per year$500 each500 refrigerators10 refrigerators7 daysConsider an even daily demand and a 365-day year.a. What is the economic order quantity?b. If the distributor wants a 97 percent service probability, what reorder point, R, shouldbe used?
Please do not give solution in image formate thanku. A given product has an expected demand of 240 units per month, with a standard deviation of 70 units per month. Leadtime is 0.5 months. Customer service level (CSL) has been set so that we have a value of k=1.28. We want to manage this product's inventory using a (R, S) periodic review policy. We plan to order every 2 months (R = 2 months). Using the k value from above, what is the order up to level, S, for this policy? Give your answer rounded to the closest integer. Since orders are placed every 2 months, and the demand is variable, the order quantities are not identical. But we can estimate an average order size. What is the expected average order size for the policy described above? Under this policy, how many orders are placed per year? Placing each order costs $100. What is the annual ordering cost?
JAL Trading is a Hong Kong manufacturer of electroniccomponents. During the course of a year it requires container cargo space on ships leaving Hong Kong bound forthe United States, Mexico, South America, and Canada.The company needs 280,000 cubic feet of cargo space annually. The cost of reserving cargo space is $7000 and thecost of holding cargo space is $0.80/ft3. Determine howmuch storage space the company should optimally order,the total cost, and how many times per year it should placean order to reserve space
Instructions There are four parts to this problem. Use Excel to perform the following. a. Use the economic order quantity formula (EOQ = SQRT((2SD/H)) to determine the optimal number of units that the company should order based on each assumed level of order based on each assumed level of order quantities provided in the data. b. Complete the table by calculating the number of orders per year, annual order cost, annual holding cost, and annual total cost. Highlight the minimum annual total cost using conditional formatting. Hint: The minimum cost should equal the cost at the EOQ you calculated in part a. c. Create a line chart that graphs annual order cost, annual holding cost, and annual total cost. The x-axis should be the quantity ordered. Include a chart legend, appropriate chart title, axes labels, and properly formatted amounts on the axes. d. Examine the chart and your responses to parts a and b. Indicate any relationships.
Halloween is the big holiday for a candy manufacturer—more than half of its salesoccur in the month leading up to Halloween. As a result, the manufacturer produces a largestockpile of inventory before the holiday. Which of the following best explains the reason forthis inventory?a. Seasonalityb. Batchingc. Buffersd. Uncertain demande. Pricing
Exercise 2: The demand per year (D) for product X is 12,100 units. The costs of placing an order (S) are $4.50. The unit cost (C) of the item is $25.00. The maintenance cost (H) per unit per year is 30% of the item's cost. 1. Use the economic order quantity (EOQ) model to determine: *Optimal quantity to order* The expected number of orders*Optimal time between orders*The total annual cost of maintaining that optimal amountNOTE: Show calculations of how you arrived at each amount 2. Answer, what are the potential benefits of using EOQ analysis for inventory management? How can you help businesses strike a balance between inventory holding costs and ordering costs?
AV City (Problem 13-1) assumed with certainty that the or-dering cost is $625/order and the inventory carrying cost is $130/unit/year. However, the inventory model parametersare frequently only estimates that are subject to somedegree of uncertainty. Consider four cases of variation inthe model parameters as follows: (a) Both ordering costand carrying cost are 10% less than originally estimated;(b) both ordering cost and carrying cost are 10% higherthan originally estimated; (c) ordering cost is 10% higherand 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 opti-mal order quantity and total inventory cost for each of the four cases. Prepare a table with values from all four casesand compare the sensitivity of the model solution tochanges in parameter values.
The table below provides demand data for 11 days (days 10-20 for the current year) for one product for the next 4 questions. The previous order was for 300 units at the end of day 9. The lead time is a constant two days. At the beginning of day 10 the inventory level is 450 units. Orders are made at the end of a day. Suppose inventory is managed with a reorder point system where Q=300 and the reorder point is 250. Day Demand Inventory 10 120 11 150 12 120 13 100 14 80 15 80 16 60 17 60 18 60 19 40 20 80 1) When is the next order? end of day ________ 2) How large is the next order? ________ 3) When is the subsequent order (after that above)? end of day _______ 4) How large is that order? _________
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.
Vallie Enterprise sells a product that cost $200 per unit and has a monthly demand of 500 units. The annual holding cost per unit is calculated as 2% of the unit purchase price. It costs the business $30 to place a single order. The maximum number of units sold for any one week is 150 and minimum sales 80 units. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. The EOQ model is appropriate. i) What is the cost minimizing solution for this product each year? ii) Determine the re-order level, minimum inventory level and maximum inventory level for the product.