OPERATION MANAGEMENT
2nd Edition
ISBN: 9781260242423
Author: CACHON
Publisher: MCG
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Chapter 14, Problem 13CQ
Summary Introduction
To identify: The increase of the demand uncertainty on the expect on-hand inventory.
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A small manufacturing facility stocks a single-use filter, part SUF100, for their production process. It costs the manufacturer $1.50 per filter to purchase and $100 per order
placed. They use a holding cost of 28% annually. Monthly demand for SUF100 follows a normal distribution with u 280 and σ = = 77. The parts arrive five months after an
order is placed. If a stockout occurs, the demand is backlogged, not lost, and costs the production facility $12.80 per part backordered.
1. Find the optimal order quantity and reorder level to minimize average annual cost of holding, setup, and stockout.
2. What is the average annual cost of holding, setup, and stockouts, when the Q,R-policy in part 1 is used?
A product's demand over (/+1) periods follows a normal distribution
with mean of 80 and standard deviation of 20. The order-up-to level
is 100. What is the in-stock probability?
0.8413
0.5987
O 0.3413
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Chapter 14 Solutions
OPERATION MANAGEMENT
Ch. 14 - Demand in each period follows the same normal...Ch. 14 - Prob. 2CQCh. 14 - For products with slow-moving demandfor example,...Ch. 14 - Prob. 4CQCh. 14 - Prob. 5CQCh. 14 - Prob. 6CQCh. 14 - Prob. 7CQCh. 14 - Prob. 8CQCh. 14 - If the target in-stock probability increases, then...Ch. 14 - Prob. 10CQ
Ch. 14 - Prob. 11CQCh. 14 - Prob. 12CQCh. 14 - Prob. 13CQCh. 14 - Prob. 14CQCh. 14 - Prob. 15CQCh. 14 - Prob. 16CQCh. 14 - Prob. 17CQCh. 14 - Prob. 18CQCh. 14 - Prob. 19CQCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - Prob. 4PACh. 14 - You are the owner of Hotspices.com, an online...Ch. 14 - Prob. 6PACh. 14 - Prob. 7PACh. 14 - Prob. 8PACh. 14 - Prob. 9PACh. 14 - Prob. 10PACh. 14 - Prob. 11PACh. 14 - Prob. 1CCh. 14 - Prob. 2CCh. 14 - Prob. 3CCh. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...Ch. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...
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- A newsvendor orders 8000 units. Demand is normally distributed with a mean of9000 and a standard deviation of 2000. What is the stockout probability?arrow_forwardPlease answer questions 9 and 10 based on this data. Daily demand for packages of five videotapes at a warehouse store is found to be normally distributed with a mean of 50 and a standard deviation of 5. When the store orders more tapes, the orders take four days to arrive. Assume the store is open 360 days a year. If the store wants the probability of stocking out to be no more than 5%, and demand each day is independent of the day before, what should be the safety stock? Please round your answer to two decimals. Safety stock= 17 Question 10 4 pts If the store wants the probability of stocking out to be no more than 5%, and demand each day is independent of the day before, what reorder point should be set? Please round your answer to two decimals. Reorder point=arrow_forwardSuppose that the owner of the campus bar, Nick’s, has determined that demand for beer during leadtime averages 5000 bottles. Nick, the owner, believes the demand during lead time can be describedby a normal distribution with a mean of 5000 bottles and a standard deviation of 300 bottles. Nick iswilling to accept a stockout risk of approximately 4 percent. Determine the appropriate z value to use.Calculate how much safety stock Nick should hold. Also determine the reorder point.arrow_forward
- All ques ...arrow_forwardPlease do not give solution in image format thankuarrow_forwardThe manager of a local retail store is ordering a specialty item from a supplier in Toronto. The lead time is cons days. The store is open 300 days a year (50 weeks Monday-Saturday, with a two-week vacation). The average. is 40 units, with a standard deviation of 7.6. (Assume that the distribution is approximately normal.) It costs $40 to place an Time left 1:45:28 order, and the annual holding cost is 30% of the inventory value. The supplier charges $8.00 per unit. Find the economic order quantity (EOQ). O a. 1788 O b. 346 O c. 36 Od. 632 The manager of a local retail store is ordering a specialty item from a supplier in Toronto. The lead time is constant at five days. The store is open 300 days a year (50 weeks Monday-Saturday, with a two-week vacation). The average daily demand is 40 units, with a standard deviation of 7.6. (Assume that the distribution is approximately normal) It costs $40 to place an order, and the annual holding cost is 30% of the inventory value. The supplier…arrow_forward
- XYZ Company must order tires from its warehouse. It costs $10400 to place an order and to review the inventory level. Annual tire sales are normally distributed with mean 18000 and variance 4,000,000. It costs $8 per year to hold a tire in inventory, and each order arrives two weeks after being placed. The Company uses periodic review (R, S) policy. What is the review interval R (in years), estimated using EOQ.? Select one: a. 0.3801 b. 0.19 c. 0.2687 d. 1.075 e. 0.1267arrow_forwardDemand in each period follows the same normal distribution (i.e., there is one demand distribution that represents demand in any single period). Assuming demand is independent acrossperiods, which of the following statements about mean demand over five periods is true? a. It equals the mean of demand over one period.b. It is greater than the mean of demand over one period but less than five times the meanof demand over one period.c. It equals five times the mean of demand over one period.d. It is even more than five times the mean of demand over one period.arrow_forwardAn automotive warehouse stocks a variety of parts that are sold at neighborhood stores. One particular part, a popular brand of oil filter, is purchased by the warehouse for $1.50 each. It is estimated that the cost of order processing and reciept is a $100 per order. The company uses an inventory carrying charge based on 28 percent annual interest rate. The monthly demand for the filters follows a normal distribution with mean 280 and a standard deviation 77. Order lead time is assumed to be 5 months. Assume that if a filter is demanded when the warehouse is out of stock, then the demand is back-ordered and the cost assessed for each back-ordered demand is $12.80. Determine the following quantities: a. The optimal values of the order quantity and the reorder level. b. The average annual cost of holding, setup, and stock-out associated with this item assuming that an optimal policy is used. c. Evaluate the cost of uncertanity for this process. That is, compare the average annual cost…arrow_forward
- An electronic manufacturer in San Francisco receives its motherboards from a supplier in Hong Kong. The lead time for orders is 3 weeks. One of their board costs $16 per unit and the holding cost for this board is $0.5 per week. They manage their inventory to achieve a 97 percent in-stock probability. Weekly demand is for 150 boards with a standard deviation of 200. Use the following table when needed: In-stock probability 99% 98% 97% 96% Z value 2.33 2.05 1.88 1.75 a. How many boards do they have on on order on average? boards b.How many boards do they have on hand on average? boards c. For this board what is the total holding cost incurred per week? per week (Round your answer to 2 decimal places.) d.What is the holding cost they incur per board? per boardarrow_forwardAn electronics retailer wants to develop an inventory policy to achieve 99% chance of not getting stockouts for a chip. The daily demand for the chip is estimated to be Normal with mean 200 and standard deviation of 20. They count the chip inventory every 2 weeks to place an order, and it takes 11 days for the ordered chips to be delivered. The retailer operates 7 days a week, 365 days a year. They are going to implement an order-up-to model. A) What base stock level should they choose? B) What is the number of chips they would have on order (on average)? C) When they checked their inventory of chips to place a new order, they found that they ran out of stock completely. In addition, they have 10 chips on way to be delivered, while there are five customers who paid for 20 chips in total and are waiting to receive their chips. How many chips should the retailer order?arrow_forwardNutmeg Inc. uses the LIFO method to account for inventory. During years in whichinventory unit costs are generally rising and in which the company purchases more inventory than it sells to customers, its reported gross profit margin will most likely be:A. lower than it would be if the company used the FIFO method.B. higher than it would be if the company used the FIFO method.C. about the same as it would be if the company used the FIFO method.arrow_forward
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