OPERATIONS MANAGEMENT (LL)-W/ACCESS
17th Edition
ISBN: 9781260037821
Author: CACHON
Publisher: MCG
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Chapter 14, Problem 15CQ
Summary Introduction
To identify: The course of action that will lead to a higher order-up-to level.
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A product’s demand over (l + 1) periods is normally distributed with a mean of 100 and standard deviation of 10. Lead time is 2 periods. The order-up-to model is used to manage inventory. If in-stock probability stays at 99%, what will happen to expected on-hand inventory when expected demand increases to 200?
A) It will increase.
B) It will stay the same.
C) It will decrease.
D) It may either increase or decrease.
Change the ordering simulation so that emergency ordersare never made. Instead, assume that all excess demandis backlogged, so the emergency cost should be replacedby a unit penalty cost for shortages. You can use thevalue $10. Now the inventory position is the amounton hand, plus the amount on order, minus the backlog.Simulate the same (s, S) policies as in the example
At Dot Com, a large retailer of popular books, demand is constant at 32,000 books per year. The cost of placing an order to replenish stock is $10, and the annual cost of holding is $4 per book. Stock is received 5 working days after an order has been placed. No backordering is allowed. Assume 300 working 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) between orders?d. What is demand during the lead time?e. What is the reorder point?f. What is the inventory position immediately after an order has been placed?
Chapter 14 Solutions
OPERATIONS MANAGEMENT (LL)-W/ACCESS
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 - You are the owner of Hotspices.com, an online...Ch. 14 - Prob. 5PACh. 14 - Prob. 6PACh. 14 - Prob. 7PACh. 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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- Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its SKUs at a constant rate of 30,000 units per year. It costs Leaky Pipe $10 to process an order to replenish stock and $1 per unit per year to carry the item in stock. Stock is received 4 working days after an order is placed. No backordering is allowed. Assume 300 working days a year.a. What is Leaky Pipe’s optimal order quantity?b. What is the optimal number of orders per year?c. What is the optimal interval (in working days) between orders?d. What is the demand during the lead time?e. What is the reorder point?f. What is the inventory position immediately after an order has been placed?arrow_forwardYou are the owner of Hotspices.com, an online retailer of hip, exotic, and hard-to-findspices. Consider your inventory of saffron, a spice (generally) worth more by weightthan gold. You order saffron from an overseas supplier with a shipping lead time of fourweeks and you order weekly. Average weekly demand is normally distributed with amean of 40 ounces and a standard deviation of 30 ounces.a. Suppose it uses an order-up-to level of 301 ounces. What is its expected on-hand inventory? b. Suppose it uses an order-up-to level of 250 ounces. What is its expected on-order inventory? c. Suppose it uses an order-up-to level of 368 ounces. What is its in-stock probability? d. Suppose it wants a .96 in-stock probability. What should its order-up-to level be?arrow_forwardLocation pooling is most effective at generating which of the following changes to performance objectives? a. Increasing the gross marginb. Increasing the target in-stock probabilityc. Decreasing on-order inventoryd. Decreasing days of supply of on-hand inventoryarrow_forward
- Which of the following assumptions is not one of the Economic Order Quantity Model assumptions, which is the most basic of the Inventory models? a) No out of stock allowed B) Materials must be delivered in one go c) Ordening and receving times are known and fixed d) The supplier is allowed to make a dscourt based on the order quuantity e) Demand is known and foxedarrow_forwardA company has an annual demand of 2500 units. The cost to place an order to replenish inventory is SR18.75 per order, and annual inventory holding cost per unit is SR1.5. On average, delivery of an order takes 3 working days (Lead time). Assume the store is open 250 days per year. What is the optimal order size? What is the optimal number of orders per year? What is the optimal number of days between orders? What is the Reorder Point (ROP)? What is the Reorder Point (ROP) with 2 days safety stock.arrow_forward6. Leaky Pipe, a local retailer of plumbing supplies, faces demand for one of its SKUs at a constant rate of 17,000 units per year. It costs Leaky Pipe $5 to process an order to replenish stock and $2.00 per unit per year to carry the item in stock. Stock is received 12 working days after an order is placed. No backordering is allowed. Assume 365 working days a year. a. Leaky Pipe's optimal order quantity is ______ units. (Enter your response rounded to the nearest whole number.) Part 3 b. The optimal number of orders per year is _____ orders. (Enter your response rounded to the nearest whole number.) Part 4 c. The optimal interval (in working days) between orders is ______ days. (Enter your response rounded to one decimal place.)arrow_forward
- . Custom Computers, Inc. assembles custom home computersystems. Th e heat sinks for the central processing units are boughtfor $12 each and are ordered in quantities of 1300 units. Annualdemand is 5200 heat sinks, the annual inventory holding cost is$3 per unit, and the cost to place an order is estimated to be $50.Assume that demand occurs continuously through the year andthat a new order is placed in time so the order arrives at the sametime as the previous inventory runs out.(a) Construct a base-case spreadsheet model to help analyzediff erent order quantities. Th e primary output of interestis the total annual inventory-related cost, comprisingtotal ordering cost and total holding cost. Holding costcan be applied to the average inventory level through theyear. Given the assumption about continuously occurringdemand and that orders arrive just in time, the averageinventory level will be half of the order quantity.(b) For the base-case order quantity of 1300 heat sinks, whatis the…arrow_forwardWhich of the following is an assumption of the EOQ model? A. The demand for the material may vary from time to time. B. All of the quantity ordered arrives in full just as the company runs out of inventory C. The item cost and the shortage costs are known and constant. D. The lead time could be different from one order to another.arrow_forward1. A service station uses 2500 oil filters during the course of a year, and this usage is constant throughout the year. These oil filters are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost per oil filter per year is $1.50 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year. a) the manager decided to change its inventory control model to a fixed time model, with the same lead time of 2 days and placing orders every 2 weeks, with the suppliers. Average daily demand remains at 10 and the standard deviation is 2.5. Currently there are 700 units of inventory on hand. What size orders should he place with suppliers?arrow_forward
- Consider a product with a daily demand of 500 units, a setup cost per production run of $100, a daily holding cost per unit of $0.20, and an annual production rate of 219,000 units. The firm operates and experiences demand 365 days per year. Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the production order quantity model. How much money per year has that mistake cost the company?arrow_forwardFor a company operating 300 days a year, the annual demand is 63,000 units, the lead time is 4 days, the ordering cost per order is BD 80 and the inventory turnover is 12, the reorder point is A. Every 12 days B. Every 4 days C. When 175 units remain D. When 840 units remainarrow_forward. A newsvendor faces normally distributed demand and the critical ratio is .8. If theprofit-maximizing quantity is ordered, which of the following statements is true? a. Expected sales are less than expected demand.b. Expected sales are greater than expected demand.c. Expected sales are exactly equal to expected demand.d. Expected sales could be less than, equal to, or greater than expected demand.arrow_forward
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