Practical Management Science, Loose-leaf Version
5th Edition
ISBN: 9781305631540
Author: WINSTON, Wayne L.; Albright, S. Christian
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 12.5, Problem 20P
a)
Summary Introduction
To show: The way the probability can be calculated.
Inventory and supply chain models:
The functions of inventory and supply chain are one of the most important business decision areas for an organization. The first important aspect of these concepts is to have adequate inventory on hand. The second important aspect is to carry a little amount of inventory as possible.
b)
Summary Introduction
To calculate: The optimal reorder point and safety stock level.
c)
Summary Introduction
To identify: The model 4 service level constraint to which $100 stockout cost is equivalent to.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
A logistics company applies the EOQ model to manage its inventory of spare parts
used for maintenance work for their trucks. Daily demand is normally distributed.
The average daily demand is 10 units, with a standard deviation of 5 units. The EOQ
is found to be 400 units and used as the order size for all orders. Order lead time is 4
days.
Currently, the firm has just received an order. In how many days do they need to
place the next order?
4 days
36 days
40 days
None of the above. Demand is random, so the time until they reach the ROP
again is also random
A logistics company applies the EOQ model to manage its inventory of spare parts used for maintenance work for their trucks. Daily demand is normally distributed. The average daily demand is 10 units, with a standard deviation of 5 units. The EOQ is found to be 400 units and used as the order size for all orders. Order lead time is 4 days.
Currently, the firm has just received an order. In how many days do they need to place the next order?
Ray 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?
Chapter 12 Solutions
Practical Management Science, Loose-leaf Version
Ch. 12.4 - Prob. 1PCh. 12.4 - Prob. 2PCh. 12.4 - Prob. 3PCh. 12.4 - Prob. 4PCh. 12.4 - Prob. 5PCh. 12.4 - Prob. 6PCh. 12.4 - Prob. 7PCh. 12.4 - Prob. 8PCh. 12.4 - Prob. 9PCh. 12.4 - Prob. 10P
Ch. 12.4 - Prob. 11PCh. 12.5 - Prob. 12PCh. 12.5 - Prob. 13PCh. 12.5 - Prob. 14PCh. 12.5 - Prob. 15PCh. 12.5 - Prob. 16PCh. 12.5 - Prob. 17PCh. 12.5 - Prob. 18PCh. 12.5 - Prob. 19PCh. 12.5 - Prob. 20PCh. 12.5 - Prob. 21PCh. 12 - Prob. 27PCh. 12 - Prob. 28PCh. 12 - Prob. 29PCh. 12 - Prob. 30PCh. 12 - Prob. 31PCh. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Prob. 34PCh. 12 - Prob. 35PCh. 12 - Prob. 36PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 42PCh. 12 - Prob. 43PCh. 12 - Prob. 44PCh. 12 - Prob. 45PCh. 12 - Prob. 46PCh. 12 - Prob. 47PCh. 12 - Prob. 48PCh. 12 - Prob. 49PCh. 12 - Prob. 53PCh. 12 - Prob. 54PCh. 12 - In terms of K, D, and h, what is the average...Ch. 12 - Prob. 56PCh. 12 - Prob. 57PCh. 12 - Prob. 58PCh. 12 - Prob. 59PCh. 12 - Prob. 60PCh. 12 - Prob. 61PCh. 12 - Prob. 62PCh. 12 - Prob. 63PCh. 12 - Prob. 64PCh. 12 - Prob. 65PCh. 12 - Prob. 66PCh. 12 - Prob. 67PCh. 12 - Prob. 68PCh. 12 - Prob. 69PCh. 12 - Prob. 70PCh. 12 - Prob. 71PCh. 12 - Prob. 1.1CCh. 12 - Prob. 1.2CCh. 12 - Prob. 1.3C
Knowledge Booster
Similar questions
- A retailer uses the order-up-to model to manage inventory of an item in a store. The leadtime for replenishments is four weeks and it can place orders weekly. Weekly demand isPoisson with mean 0.10 unit. Its order-up-to level is five and unfilled demand is backordered. What is the coefficient of variation of its orders?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_forwardWhich of the following can be said for the Production Order Quantity (PPC) model? Lütfen birini seçin: O a. Causes more stock than ESM model O b. Uses order cost instead of setup cost in the total inventory cost formula c. Eliminates the assumption that demand is known and fixed O d. Assumes one-time delivery of orders O e. ÜSM model is suitable if the product in stock is sold/used as it is producedarrow_forward
- You are conducting a retrospective analysis for an Order-Up-To system (thus, the unsold inventory at the end of a week is carried over to the next week). The beginning inventory in week 1 is 150 units, the demand in week 1 is 180 units and the demand during week 2 is 250 units. If you receive a shipment of 115 units every week, at the end of week 2, the inventory level is 180 the inventory level is 200 the inventory level is 310 the backorder level is 30 the backorder level is 50 none of the above is correctarrow_forwardConsider a fixed period inventory model. The daily demand of the product has a mean of 30 and standard deviation of 4; orders are placed every 18 days and shipment lead time is 6 days. The store has a service policy of 96%. What is the inventory required?arrow_forwardSuppose 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_forward
- A store uses an EOQ system for one of its most popular product. The product has a daily demand of 49 units. The store purchases the product from a supplier. The supplier has an order lead time of 6 days. The store uses an order quantity of 1617 units. A shipment of the supplier always at the beginning of day and the store always place a new order at the end of day. The store also monitors its inventory continuously. Assume that a shipment arrives at the beginning of day 1 and the beginning inventory becomes 1617 units. What is the inventory level at the end of day 12?arrow_forwardYour firm uses a periodic review system for all SKUs classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item’s current characteristics are:Demand 1D2 = 15,080 units/yearOrdering cost 1S2 = $125.00/orderHolding cost 1H2 = $3.00/unit/yearLead time 1L2 = 5 weeksCycle@service level = 95 percentDemand is normally distributed, with a standard deviation of weekly demand of 64 units.a. Calculate the item’s EOQ.b. Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item.c. Which system requires more safety stock and by how much?arrow_forward6-23 Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that West Valve stocks, and she has concluded that the average ordering cost is $25 per order. Furthermore, it takes about two weeks for an order to arrive from the supplier, and during this time, the demand per week for West valves is approximately 80. d. What is the average inventory? What is the annual holding cost? e. How many orders per year would be placed? What is the annual ordering cost?arrow_forward
- In a periodic order system, the lead time for a box of weed killer is 2 weeks. The review period is 1 week. Demand during the protection interval (i.e. review period +lead time) averages 218 boxes, with a standard deviation of 40 boxes. a.) What is the cycle-service level when the target inventory is set at 300 boxes? b.) In the fall season, demand for weed killer decreases but also becomes more variable. Assume demand during the protection interval is expected to decrease to 180 boxes, but with a standard deviation of 50 boxes. What would be the cycle-service level if management keeps the target inventory level set at 300 boxes? C) if the solution is feasible, should the order quantity changearrow_forward6-23 Barbara Bright is the purchasing agent for West Valve Company. West Valve sells industrial valves and fluid control devices. One of the most popular valves is the Western, which has an annual demand of 4,000 units. The cost of each valve is $90, and the inventory carrying cost is estimated to be 10% of the cost of each valve. Barbara has made a study of the costs involved in placing an order for any of the valves that West Valve stocks, and she has concluded that the average ordering cost is $25 per order. Furthermore, it takes about two weeks for an order to arrive from the supplier, and during this time, the demand per week for West valves is approximately 80. a. What is the EOQ? b. What is the ROP? c. Is the ROP greater than the EOQ? If so, how is this situation handled? d. What is the average inventory? What is the annual holding cost? e. How many orders per year would be placed? What is the annual ordering cost?arrow_forwardDaily demand of a chemical at an oil refinery is normally distributed with a mean of 60 litres and a standard deviation of 7. The supplier reliably delivers the chemical by maintaining a constant lead time of 1 week. There are no delivery charges from the supplier. Sales occur throughout the year. An order placement requires one hour of an administrative employee who is paid $20 per hour. Receiving and storing a chemical shipment requires two workers to work for half an hour. Workers are paid $12 per hour each. Chemical’s purchase price is $500 per litre. Annual cost of capital is 5%. Other holding costs are estimated to be $0.5 per litre. Find the order quantity and the reorder point to satisfy a 95% service level during the lead time. (Round answers to 2 decimal places.)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,