Operations Management
2nd Edition
ISBN: 9781260484687
Author: CACHON, Gerard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 14, Problem 16CQ
Summary Introduction
To explain: The likely discovery Person AL will make with respect to the distribution center regarding the on-hand inventory.
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3. Daily demand for tablets of amazon is normally
distributed, with a mean of 100 and standard
deviation of 30. The tablet supplier takes an average
of 15 days to replenish inventory at Amazon. The
standard deviation of the supplier lead time is 5 days.
Amazon follows a "periodic review policy" with a
review period of 30 days. Amazon is targeting a CSL
of 98% for its tablet inventory. (a) What is the mean
demand during lead time and review period?
What is the standard deviation of demand during
lead time and review period? (c) What is the safety
(b)
stock (in units) during lead time and review period?
Algro Inc. keeps a wide range of parts and materials on hand for use in its production
processes. Management has recently had difficulty managing parts inventory as demand
for its finished goods has increased; they frequently run out of some critical parts while
having an endless supply of others. They would like to classify their parts inventory
according to the ABC approach to better control inventory. The following is a list of
parts, along with their annual usage and unit value:
Item
Annual
Unit
Item
Annual
Unit
Number
Usage
Cost
Number
Usage
Cost
1
36
$350
2
510
30
3
50
23
4
300
45
5
18
1900
6
500
8
7
710
4
8
80
26
9
344
28
10
67
440
11
510
2
12
682
35
13
1216
95
50
14
10
3
15
820
1
KARAN2222222222
16
60
$610
17
120
20
18
270
15
19
45
50
20
19
3200
21
910
3
12
4750
23
30
2710
24
24
1800
25
870
105
26
244
30
27
750
15
28
45
110
29
46
160
30
165
25
a. Classify the inventory items according to the ABC approach using the dollar
value of annual demand.
b. Clearly explain why you…
U.S. Airfilter has hired you as a supply chain consultant. The company makes air filters for residential heating and air-conditioning systems. These filters are made in a single plant located in Louisville, Kentucky, in the United States. They are distributed to retailers through wholesale centers in 100 locations in the United States, Canada, and Europe. You have collected the following data relating to the value of inventory in the U.S. Airfilter supply chain:
QUARTER 1 (JANUARY THROUGH MARCH)
QUARTER 2 (APRIL THROUGH JUNE)
QUARTER 3 (JULY THROUGH SEPTEMBER)
QUARTER 4 (OCTOBER THROUGH DECEMBER)
All amounts in millions of U.S. dollars
Sales (total quarter):
United states
300
350
405
375
Canada
75
60
75
70
Europe
30
33
20
15
Cost of goods sold (total quarter)
280
295
340
350
Raw materials at the Louisville plant (end-of-quarter)
50
40
55
60
Work-in-process and finished goods at the Louisville plant (end-of-quarter)
100
105
120
150
Distribution center…
Chapter 14 Solutions
Operations 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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- The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.arrow_forwardScenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?arrow_forwardDemand in each period is normally distributed with a mean of 100 and standard deviation of 50. Assuming demand across periods are independent, what is the standard deviation of the total demand over 4 periods?arrow_forward
- Daily demand for a type of sandwich sold at DoorRed Cafe (DRC) is normally distributed with a mean of 65 and a standard deviation of 27. DRC orders the sandwiches from a wholesaler (everyday morning before 5:30 AM) at a wholesale price of $4 per sandwich and sells them at a retail price of $7 per sandwich. Pursuant to the contract between DRC and its wholesaler, the transportation cost is currently borne by the wholesaler. The wholesaler does not take back any unsold sandwiches. However, DRC can sell any unsold inventory at a discounted price of $3 after 5:00 PM every day. d) Now suppose that the contract between DRC and its wholesaler expires and pursuant to the new contract, if DRC orders more than 56 sandwiches (anything more than or equal to 57), the transportation cost is no longer borne by the wholesaler and DRC will have to pay $30 for transportation. If DRC orders less than or equal to 56, the transportation cost for DRC is still zero. What is DRC’s optimal order quantity for…arrow_forwardA manager must set up inventory ordering systems for two new production items, P34 and P35.P34 can be ordered at any time, but P35 can be ordered only once every four weeks. The companyoperates 50 weeks a year, and the weekly usage rates for both items are normally distributed. Themanager has gathered the following information about the items.Item P34 Item P35Average weekly demand 60 units 70 unitsStandard deviation 4 units per week 5 units per weekUnit cost $15 $20Annual holding cost 30% 30%Ordering cost $70 $30Lead time 2 weeks 2 weeksAcceptable stockout risk 2.5% 2.5%a. When should the manager reorder each item?b. Compute the order quantity for P34.c. Compute the order quantity for P35 if 110 units are on hand at the time the order is placed.arrow_forwardYou are running the supply chain for a grocery store operating across Upstate Souun Carolina. You operate a central warehouse and have multiple stores. For each of the following situations determine if it would be best to operate inventory for the product that is pooled at your central warehouse or determined individually by each retail store. Provide at least 1 sentence discussing your choice. (a) The demand for boxes of Nutty Bars at each store during a week is i.i.d. with mean u = 1000 and standard deviation o = Nutty Bars are high compared to holding costs for Nutty Bars. 10. Transshipment costs between the stores for (b) The demand for Fudge Rounds at each store during a week is i.i.d. with mean u = 200 75. Transhipment costs between the stores for Fudge and standard deviation o Rounds are relatively small compared to holding costs.arrow_forward
- Teddy Bower is an outdoor clothing and accessories chain that purchases a line of parkas at $10 each from its Asian supplier, TeddySports. Unfortunately, at the time of the order placement, demand is still uncertain: Teddy Bower forecasts that its demand is normally distributed with a mean of 1800 and a standard deviation of 1000. Teddy Bower sells these parkas at $22 each. Unsold parkas have little salvage value; Teddy Bower simply gives them away to a charity (and also doesn't collect a tax benefit for the donation). How many parkas should Teddy Bower buy from TeddySports to maximize expected profit? (please use the normal distribution table and round up to the nearest integer).arrow_forwardCANON produces printers for sale in northern Europe in its Taiwan factory. Printers sold in different countries differ in terms of the power outlets as well as the language for the manuals. Currently, CANON assembles and packs printers for sale in individual countries. The distribution of weekly demand in different countries is normally distributed, with means and standard deviations as shown in the table below: Country Mean Weekly Demand Standard Deviation Germany 3,000 2,000 Norway 4,000 2,200 Denmark 2,000 1,400 3(a). Initially, it is assumed that demand in different countries is independent. Given that the lead time from the Taiwan factory is eight (8) weeks, how much safety inventory does CANON require in northern Europe if it targets a CSL of 95 percent? HINT: For the disaggregated option, just show sample calculations for one country (e.g., Germany), then organize the results for the remaining countries in a table or amend the table…arrow_forwardYou are working in a food manufacturing company assigned to the Production Department. You have observed that some of the raw materials in the Warehouse are not properly utilized by the production team. These raw materials are perishable and have short shelves life. The unutilized raw materials were due to the excessive inventory purchase by the company as it failed to plan its production activity. This has also increased the spending of the company, decreasing the company's profit. As the controller, what are the actions you may implement to control the situation?arrow_forward
- Zara is a fashion label and fashion chain store established in 1975 by the Spanish group Inditex owned by Amancio Ortega. Zara tripled its profit and stores during the last two decades and ranked the third biggest retailer worldwide (Zhang, 2008). Zara has been struggling with managing inventories accumulated because its retail outlets are accumulating the demand and leading to inaccurate demand forecast orders. Zara also has a free return policy allowing customers to overstate demands due to shortages intentionally and then cancel when the supply becomes adequate again. a) Identify and discuss the supply chain term associated with Zara's inventory accumulation problem in the supply chain?arrow_forwardZara is a fashion label and fashion chain store established in 1975 by the Spanish group Inditex owned by Amancio Ortega. Zara tripled its profit and stores during the last two decades and ranked the third biggest retailer worldwide (Zhang, 2008). Zara has been struggling with managing inventories accumulated because its retail outlets are accumulating the demand and leading to inaccurate demand forecast orders. Zara also has a free return policy allowing customers to overstate demands due to shortages intentionally and then cancel when the supply becomes adequate again. b) Advise how Zara can resolve the inventory accumulation problem in its supply chain?arrow_forwardSuppose the weekly demand at each regional distribution center (RDC) is normally distributed with a mean =117 and standard deviation =23. The company is considering to replace the RDCs with one central distribution center (CDC). The CDC would continue to have a continuous review policy, and the delivery lead time from Asia will remain 8 weeks. What is the average weekly demand at CDC?arrow_forward
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