XYZ company is determining the inventory policy for product A which has annual demand distributed as Normal (500, 120). The value of each item is $25. The fixed ordering cost per order is $200. The lead time from supplier of an order is stochastic with mean 4 weeks and standard deviation 2 weeks. The company calculates the holding cost by using an interest rate of 25%. a) Determine the (Q, R) values if the company desires to use a Type 1 service level of 98%. b) Determine the (Q, R) values if the company desires to use a Type 2 service level of 95%. c) Determine the (Q, R) values if the company desires to use a shortage cost of $6.74 per unit of unsatisfied demand.
XYZ company is determining the inventory policy for product A which has annual demand distributed as Normal (500, 120). The value of each item is $25. The fixed ordering cost per order is $200. The lead time from supplier of an order is stochastic with mean 4 weeks and standard deviation 2 weeks. The company calculates the holding cost by using an interest rate of 25%. a) Determine the (Q, R) values if the company desires to use a Type 1 service level of 98%. b) Determine the (Q, R) values if the company desires to use a Type 2 service level of 95%. c) Determine the (Q, R) values if the company desires to use a shortage cost of $6.74 per unit of unsatisfied demand.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter10: Introduction To Simulation Modeling
Section10.4: Simulation With Built-in Excel Tools
Problem 14P
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XYZ company is determining the inventory policy for product A which has annual demand distributed as Normal (500, 120). The value of each item is $25. The fixed ordering cost per order is $200. The lead time from supplier of an order is stochastic with mean 4 weeks and standard deviation 2 weeks. The company calculates the holding cost by using an interest rate of 25%.
a) Determine the (Q, R) values if the company desires to use a Type 1 service level of 98%.
b) Determine the (Q, R) values if the company desires to use a Type 2 service level of 95%.
c) Determine the (Q, R) values if the company desires to use a shortage cost of $6.74 per unit of unsatisfied demand.
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