EBK OPERATIONS MANAGEMENT
14th Edition
ISBN: 9781260718447
Author: Stevenson
Publisher: MCG COURSE
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 12, Problem 31P
A drugstore uses fixed-order cycles for many of the items it stocks. The manager wants a service level of .98. The order interval is 14 days, and lead time is 2 days. Average demand for one item is 40 units per day, and the standard deviation of demand is 3 units per day. Given the on-hand inventory at the reorder time for each order cycle shown in the following table, determine the order quantities for cycles 1, 2, and 3.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A drugstore uses fixed-order cycles for many of the items it stocks. The manager wants a service level of .99. The order interval is 12 days, and lead time is 4 days. Average demand for one item is 63 units per day, and the standard deviation of demand is 6 units per day. Given the on-hand inventory at the reorder time for each order cycle shown in the following table. Use Table. Cycle On Hand 1 38 2 10 3 93 Determine the order quantities for cycles 1, 2, and 3: (Round your answers to the nearest whole number) Cycle Units 1 1019 Numeric ResponseEdit Unavailable. 1019 incorrect. 2 1047 Numeric ResponseEdit Unavailable. 1047 incorrect. 3 964 Numeric ResponseEdit Unavailable. 964 incorrect.
A company is using a continuous review system for its inventory. Due to the contracts made with the customers, the weekly demand is constantly 40 units. The average lead time of orders is 2 weeks and the standard deviation of lead time is 1 week. The current service level is 95%.
In order to reduce inventory holding costs, the company wants to reduce its reorder point. To achieve this, there are two options that have approximately the same cost for the company: reduce the standard deviation of lead time to 0.5 weeks or reduce the service level to 90%.
A) Which option is more advantageous for the company?
B) How much reduction does this option bring in the reorder point as opposed to the current situation? Show your calculations
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.)
Chapter 12 Solutions
EBK OPERATIONS MANAGEMENT
Ch. 12.3 - Prob. 1RQCh. 12 - What are the primary reasons for holding...Ch. 12 - What are the requirements for effective inventory...Ch. 12 - Briefly describe each of the costs associated with...Ch. 12 - What potential benefits and risks do RFID tags...Ch. 12 - Prob. 5DRQCh. 12 - Prob. 6DRQCh. 12 - a. List the major assumptions of the EOQ model. b....Ch. 12 - Explain briefly how a higher carrying cost can...Ch. 12 - What is safety stock, and what is its purpose?
Ch. 12 - Prob. 10DRQCh. 12 - What is meant by the term service level? Generally...Ch. 12 - Describe briefly the A-B-C approach to inventory...Ch. 12 - The purchasing agent for a company that assembles...Ch. 12 - Explain how a decrease in setup time can lead to a...Ch. 12 - What is the single-period model, and under what...Ch. 12 - Can the optimal stocking level in the...Ch. 12 - Prob. 17DRQCh. 12 - What trade-offs are involved in each of these...Ch. 12 - Who needs to be involved in inventory decisions...Ch. 12 - How has technology aided inventory management? How...Ch. 12 - To be competitive, many fast-food chains began to...Ch. 12 - As a supermarket manager, how would you go about...Ch. 12 - Sam is at the post office to mail a package. After...Ch. 12 - Give two examples of unethical conduct involving...Ch. 12 - Prob. 1PCh. 12 - a. The following table contains figures on the...Ch. 12 - A bakery buys flours in 25-pound bags. The bakery...Ch. 12 - A large law firm uses an average of 40 boxes of...Ch. 12 - Garden Variety Flower Shop uses 750 clay pots a...Ch. 12 - A produce distributor uses 800 packing crates a...Ch. 12 - A manager receives a forecast for next year....Ch. 12 - A food processor uses approximately 27,000 glass...Ch. 12 - The Friendly Sausage Factory (FSF) can produce hot...Ch. 12 - A chemical firm produces sodium bisulfate in...Ch. 12 - A company is about to begin production of a new...Ch. 12 - Prob. 12PCh. 12 - A mail-order house uses 18,000 boxes a year....Ch. 12 - A jewelry firm buys semiprecious stones to make...Ch. 12 - A manufacturer of exercise equipment purchases the...Ch. 12 - A company will begin stocking remote control...Ch. 12 - A manager just received a new price list from a...Ch. 12 - A newspaper publisher uses roughly 800 feet of...Ch. 12 - Given this information: Expected demand during...Ch. 12 - Given this information: Lead-time demand = 600...Ch. 12 - Demand for walnut fudge ice cream at the Sweet...Ch. 12 - The injection molding department of a company uses...Ch. 12 - A company uses 85 circuit boards a day in a...Ch. 12 - One item a computer store sells is supplied by a...Ch. 12 - The manager of a car wash received a revised price...Ch. 12 - A small copy center uses five 500-sheet boxes of...Ch. 12 - Ned's Natural Foods sells unshelled peanuts by the...Ch. 12 - Regional Supermarket is open 360 days per year....Ch. 12 - A service station uses 1,200 cases of oil a year....Ch. 12 - Caring Hospital's dispensary reorders doses of a...Ch. 12 - A drugstore uses fixed-order cycles for many of...Ch. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Demand for jelly doughnuts on Saturdays at Don's...Ch. 12 - A public utility intends to buy a turbine as part...Ch. 12 - Skinner's Fish Market buys fresh Boston bluefish...Ch. 12 - A small grocery store sells fresh produce, which...Ch. 12 - Demand for devil's food whipped-cream layer cake...Ch. 12 - Prob. 39PCh. 12 - Demand for rug-cleaning machines at Clyde's...Ch. 12 - A manager is going to purchase new processing...Ch. 12 - A Las Vegas supermarket bakery must decide how...Ch. 12 - Offwego Airlines has a daily flight from Chicago...Ch. 12 - UPD Manufacturing produces a range of health care...Ch. 12 - Prob. 1.2CQCh. 12 - Prob. 2.1CQCh. 12 - SARAH LUBBERS AND CHRIS RUSCHE, GRAND VALLEY STATE...Ch. 12 - SARAH LUBBERS AND CHRIS RUSCHE, GRAND VALLEY STATE...Ch. 12 - Prob. 3.3CQCh. 12 - SARAH LUBBERS AND CHRIS RUSCHE, GRAND VALLEY STATE...Ch. 12 - Prob. 3.5CQCh. 12 - Prob. 1OTQCh. 12 - Prob. 2OTQCh. 12 - Prob. 3OTQCh. 12 - Prob. 4OTQ
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- Suppose the following item is being managed using a fixed-order quantity model with safety stock. Annual Demand = 100,000 units Order quantity = 30,000 units Safety stock = 4000 units What are the average inventory level and inventory turnover for this item?arrow_forwardThe Western Jeans Company purchases denim from Cumberland Textile Mills. The Western Jeans Company uses 35,000 yards of denim per year to make jeans. The cost of ordering denim from the textile company is $500 per order. It costs Western $0.35 per yard annually to hold a yard of denim in inventory. Determine the optimal number of yards of denim the Western Jeans Company should order, the minimum total annual inventory cost, the optimal number of orders per year, and the optimal time between orders.arrow_forwardA drugstore uses fixed-order cycles for many of the items it stocks. The manager wants a servicelevel of .98. The order interval is 14 days, and lead time is 2 days. Average demand for one itemis 40 units per day, and the standard deviation of demand is 3 units per day. Given the on-handinventory at the reorder time for each order cycle shown in the following table, determine theorder quantities for cycles 1, 2, and 3.Cycle On Hand1 422 83 103arrow_forward
- You were asked to assist with optimising the stock ordering and holding process for a company that sells car batteries. As part of the process, you need to decide the optimal order size to minimise associated costs. You are given the following information: • The batteries cost R400 each. • Sales volumes are constant at 600 batteries per month. • The lead time from order to delivery is 14 days. • It costs R360 for every order to be processed. It is calculated that it costs R5 to store a battery per month. 4) Calculate the optimal total costs.arrow_forwardHayes 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.arrow_forwardANT Infra orders two kinds of precast items: A and B for use in its projects from two different suppliers. The precasts are needed throughout the entire 52-week year. Precast A are used at a relatively constant rate and are ordered whenever the remaining quantity drops to the reorder level. While, precast B is ordered from a supplier who delivers by every three weeks. Data for both precast items are as follows:Item Precast A Precast BAnnual demand 10,000 5,000Holding cost (% of item cost)20% 20%Order cost $150 $25Lead time 4 weeks 1 weekSafety stock 55 units 5 unitsItem cost $10.00 $2.00 a. Employ Q system for precast A and calculate the EOQ, the reorder point, total inventory cost? b. Employ P system for precast B and estimate the target level inventory and total inventory cost?arrow_forward
- A product has a reorder point of 110 units and is ordered four times a year on average. The following table shows the historical distribution of demand values observed during lead time. Managers have noted that stockouts occur 30 percent of the time with this policy, and they question whether a change in inventory policy, to include some safety stock, might be an improvement. The managers realize that any safety stock would increase the service level, but they are worried about the increased costs of carrying the safety stock. Currently, stockouts are valued at $20 per unit per occurrence, while inventory carrying costs are $10 per unit per year. Demand Probability 100 0.20 110 0.35 120 0.30 130 0.15 What level of safety stock is best?arrow_forwardThe Big Buy Supermarket stocks Munchies Cereal. Demand for Munchies is 4,000 boxes peryear (365 days). It costs the store $60 per order of Munchies, and it costs $0.80 per box per yearto keep the cereal in stock. Once an order for Munchies is placed, it takes 4 days to receive theorder from a food distributor. Determine The optimal order sizearrow_forwardA manager receives a forecast for next year. Demand is projected to be 600 units for the first half of the year and 920 units for the second half. The monthly holding cost is $2 per unit, and it costs an estimated $55 to process an order. a.Assuming that monthly demand will be level during each of the six-month periods covered by the forecast (e.g., 100 per month for each of the first six months), determine an order size that will minimize the sum of ordering and carrying costs for each of the six-month periods. (Round your answers to the nearest whole number.) Period Order Size 1 – 6 months?_____units 7 – 12 months?_____units b.If the vendor is willing to offer a discount of $10 per order for ordering in multiples of 50 units (e.g., 50, 100, 150), would you advise the manager to take advantage of the offer in either period? If so, what order size would you recommend? (Round intermediate calculations to 2 decimal places.) Period Order Size 1 – 6 months?____ units 7 – 12 months?____…arrow_forward
- Kris Lee, the owner and manager of the Quality Hardware Store, is reassessing his inventory policy for hammers. He sells an average of 50 hammers per month, so he has been placing an order to purchase 50 hammers from a wholesaler at a cost of $20 per hammer at the end of each month. However, Kris does all the ordering for the store himself and finds that this is taking a great deal of his time. He estimates that the value of his time spent in placing each order for hammers is $75. What would the unit holding cost for hammers need to be for Kris' current inventory policy to be optimal according to the basic EOQ model? What is this unit holding cost as a percentage of the unit acquisition cost? What is the optimal order quantity if the unit holding cost actually is 20 percent of the unit acquisition cost? What is the corresponding value of TVC? What is TVC for the current inventory policy? If the wholesaler typically delivers an order of hammers in 5 working days (out of 25 working…arrow_forwardRay wishes to determine the optimal order quantity for its best-selling bike in his bike store. Ray pays the supplier a wholesale price of $118 each for this bike. Ray has estimated the average daily demand for this bike is 23 units. The store opens 304 days a year. The cost to carry one bike in the store for a whole year is 8% of the unit bike cost. Ray has estimated that, on average, the order processing cost, i.e., ordering cost, with the bike supplier each time is $152, and it roughly takes 20 working days to receive the order from the supplier. Ray wishes to avoid the stock-out situation with a probability of 95%, and this requires Ray to carry a safety stock of 30 bikes in the store. What is the optimal order quantity (EOQ value) that Ray should order each time from the bike supplier to minimize his long-run inventory cost?arrow_forwardThe Hawkins Supply Company is currently faced with an inventory rotation problem. This difficulty stems from the fact that some supplies must be used prior to a stated expiration date. Upon receipt, a new shipment of these perishable items must be stacked beneath the boxes that are currently in inventory. A substantial amount of time is consumed in restacking the items according to their expiration dates.The company would like to reduce the double and sometimes triple handling of items. How can this goal be achieved? Are there alternative solutions which might also be effective?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY