OPERATIONS MANAGEMENT (LL)-W/ACCESS
17th Edition
ISBN: 9781260037821
Author: CACHON
Publisher: MCG
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Chapter 14, Problem 8CQ
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To identify: The target in-stock probability.
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. 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.
You 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?
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
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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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
- 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?arrow_forwardDiskup produces a variety of personal computer products. High-density 3.5-inch disksare produced at a rate of 1,800 per day and are shipped out at a rate of 800 per day. Thedisks are produced in batches. Each disk costs the company 20 cents, and the holdingcosts are based on an 18 percent annual interest rate. Shortages are not permitted. Eachproduction run of a disk type requires recalibration of the equipment. The companyestimates that this step costs $180.a. Find the optimal size of each production run and the time between runsarrow_forwardIf the target in-stock probability increases, then the expected time between stockouts: a. increases.b. remains the same.c. decreases.d. could increase or decrease.arrow_forward
- 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_forward. Suppose inventory is managed using the order-up-to model. Which of the following actions will certainly lead to a higher order-up-to level? In all cases, assume thecharacteristics of the demand process do not change. I. Increase in the target in-stock probability (for the same lead time)II. Increase in the lead time (for the same in-stock probability)a. I onlyb. II onlyc. I and IId. None of the abovearrow_forwardThe materials manager of a tire manfacturer must predict periodically place order for a key chemical one of the raw materials used in manufacturing uses the chemical at a rate of 300lbs each week and the lead time of delivery is 4 days. Assume that the manufacturing operation runs 5 days a week. At what point should the chemical be reorderedd a. when 1200lbs are remaining b. where 0lbs are remaining c. where 375lbs are remaining d. when 240lbs are remarrow_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_forwardSuppose the newsvendor model is used to manage inventory. Which of the followingcan happen when the order quantity is increased by one unit? a. Expected sales increases by more than one unit.b. Expected leftover inventory increases by more than one unit.c. Expected sales decrease by less than one unit.d. Expected leftover inventory increases by less than one unit.arrow_forwardOrder-up to model is that have been ordered but have not been received. Order up to level is when stock levels are periodically reviewed, and an amount of the item is ordered to return stock levels to the target level. Which of the following is true about the order-up to model? A. It prevents a company from being out of stock B. It is useful for a goods with a short shelf life C. As lead time decreases, inventory levels will decrease.arrow_forward
- The best quantity to order One of the formulas for inventorymanagement says that the average weekly cost of ordering, payingfor, and holding merchandise iswhere q is the quantity you order when things run low (shoes,TVs, brooms, or whatever the item might be); k is the cost ofplacing an order (the same, no matter how often you order); c isthe cost of one item (a constant); m is the number of items soldeach week (a constant); and h is the weekly holding cost per item(a constant that takes into account things such as space, utilities,insurance, and security). Find dA>dq and d2A>dq2.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_forwardFixed-order-interval. This type of problem can be recognized when an order interval is given (e.g.,inventory is ordered every 10 days) along with the demand rate, lead time, and quantity on hand atorder time. Use Formula 13–16 to find the optimal order size.A lab orders a number of chemicals from the same supplier every 30 days. Lead time is five days.The assistant manager of the lab must determine how much of one of these chemicals to order. Acheck of stock revealed that eleven 25-milliliter (ml) jars are on hand. Daily usage of the chemical isapproximately normal with a mean of 15.2 ml per day and a standard deviation of 1.6 ml per day. Thedesired service level for this chemical is 95 percent.a. How many jars of the chemical should be ordered?b. What is the average amount of safety stock of the chemical?arrow_forward
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