Operations Management: Processes and Supply Chains (11th Edition)
11th Edition
ISBN: 9780133872132
Author: Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman
Publisher: PEARSON
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Chapter 9, Problem 17P
In a continuous review inventory system, the lead time for door knobs is 5 weeks. The standard deviation of demand during the lead time is 85 units. The desired cycle-service level is 99 percent. The supplier of door knobs streamlined its operations and now quotes a 1-week lead time. How much can safety stock be reduced without reducing the 99 percent cycle-service level?
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Students have asked these similar questions
A pharmacist is trying to determine the inventory order and stock levels for a particular drug. The following information is available about the drug.
Demand (D)
85 tablets/week
Working weeks per year
52 weeks
Unit holding cost per year (H)
$6
Order cost (S)
$44/order
Standard deviation of weekly demand (sd)
15 tablets
Lead time (L)
2 weeks
Desired cycle service level
95%
If the pharmacist uses the continuous review (Q) system to control the inventory of the drug, what would be the order quantity and reorder point?
If the pharmacist uses the periodic review (P) system to control the inventory of the drug, what would be the review interval and target inventory level? (Hint: Use the EOQ model to derive the review interval P)
Romulo Drugstore sells 10 bottles of Paracetamol syrup Strawberry flavor 60 mL a day, and 15 bottles on holidays and weekends. It takes 5 days for the supplier to deliver the order; and on peak seasons and certain occasions, the supplier takes 10 days to deliver the ordered items.
What should be the safety stock level of the said item?
20 bottles
25 bottles
100 bottles
175 bottles
What is the Average Lead Time?
5 days
10 days
15
None
What is the Maximum Lead Time?
5 days
10 days
15
None
What is the average daily use?
10 bottles
15 bottles
20 bottles
25 bottles
100 bottles
What is the maximum daily use?
10 bottles
15 bottles
20 bottles
25 bottles
100 bottles
Which of the following is NOT True?
Cycle Stock Inventory must be maintained.
Safety Stock Inventory must be secured.
Monitoring of inventory movement facilitates the necessary adjustment of both the Cycle Stock and Safety Stock Inventory.
Safety Stock inventory is also considered as a buffer stock.
None of the choices.
SAFETY STOCK WITH PROBABILISTIC DEMAND
Memphis Regional Hospital stocks a “code blue” resuscitation kit that has a normally distributeddemand during the reorder period. The mean (average) demand during the reorder period is 350 kits,and the standard deviation is 10 kits. The hospital administrator wants to follow a policy that results instockouts only 5% of the time.(a) What is the appropriate value of Z ? (b) How much safety stock should the hospital maintain?(c) What reorder point should be used?APPROACH c The hospital determines how much inventory is needed to meet the demand 95% of thetime. The figure in this example may help you visualize the approach. The data are as follows:m = Mean demand = 350 kitssdLT = Standard deviation of demand during lead time = 10 kitsZ = Number of standard normal deviations
Chapter 9 Solutions
Operations Management: Processes and Supply Chains (11th Edition)
Ch. 9 - What is the relationship between inventory and the...Ch. 9 - Suppose that a large discount retailer with a lot...Ch. 9 - Will organizations ever get to the point where...Ch. 9 - A part is produced in lots of 1,000 units. It is...Ch. 9 - Prince Electronics, a manufacturer of consumer...Ch. 9 - Terminator, Inc. manufactures a motorcycle part in...Ch. 9 - Ruby-Star Incorporated is considering two...Ch. 9 - Haley Photocopying purchases paper from an...Ch. 9 - Prob. 6PCh. 9 - Southern Markets, Inc. is considering the use of...
Ch. 9 - New Wave Shelving’s inventory manager would like...Ch. 9 - Yellow Press, Inc. buys paper in 1,500-pound rolls...Ch. 9 - Babble, Inc. buys 400 blank cassette tapes per...Ch. 9 - At Dot Com, a large retailer of popular books,...Ch. 9 - Leaky Pipe, a local retailer of plumbing supplies,...Ch. 9 - Sam’s Cat Hotel operates 52 weeks per year, 6...Ch. 9 - Consider again the kitty litter ordering policy...Ch. 9 - In a Q system, the demand rate for strawberry ice...Ch. 9 - Petromax Enterprises uses a continuous review...Ch. 9 - In a continuous review inventory system, the lead...Ch. 9 - In a two-bin inventory system, the demand for...Ch. 9 - You are in charge of inventory control of a highly...Ch. 9 - Your firm uses a continuous review system and...Ch. 9 - A company begins a review of ordering policies for...Ch. 9 - Prob. 22PCh. 9 - The Farmer’s Wife is a country store...Ch. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Prob. 26PCh. 9 - In a P system, the lead time for a box of...Ch. 9 - Suppose that Sam’s Cat Hotel in Problem 13 uses...Ch. 9 - Your firm uses a periodic review system for all...Ch. 9 - Using the same information as in Problem 21,...Ch. 9 - Wood County Hospital consumes 1,000 boxes of...Ch. 9 - A golf specialty wholesaler operates 50 weeks per...Ch. 9 - What is the EOQ and what is the lowest total cost?Ch. 9 - What is the annual cost of holding inventory at...Ch. 9 - Prob. 3AMECh. 9 - Prob. 4AMECh. 9 - Prob. 5AMECh. 9 - Prob. 6AMECh. 9 - Comment on the sensitivity of the EOQ model to...Ch. 9 - Consider the pressures for small versus large...Ch. 9 - Prob. 2VCCh. 9 - The Marker Maker© product recently experienced an...Ch. 9 - Prob. 1CCh. 9 - Prob. 2C
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- Fisk Corporation is trying to improve its inventory control system and has installed an online system at its retail stores. Fisk anticipates sales of 58,800 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. In the second year, Fisk Corporation finds that it can reduce ordering costs to $1 per order, but carrying costs will stay the same at $1.50 per unit. a-1. What is the economic ordering quantity for the second year? Economic ordering quantity (EOQ) a-2. How many orders will be placed during the second year? Number of orders a-3. What will the average inventory be for the second year? Average inventory Total costs units units a-4. What is the total cost of ordering and carrying inventory for second year? LAarrow_forwardIn a continuous review inventory system, the lead time for door knobs is 5 weeks. The standard deviation of demand during the lead time is 85 units. The desired cycle-service level is 99 percent. The supplier of door knobs streamlined its operations and now quotes a one-week lead time. How much can safety stock be reduced without reducing the 99 percent cycle-service level?arrow_forwardRomulo Drugstore sells 10 bottles of Paracetamol syrup Strawberry flavor 60 mL a day, and 15 bottles on holidays and weekends. It takes 5 days for the supplier to deliver the order; and on peak seasons and certain occasions, the supplier takes 10 days to deliver the ordered items. What should be the safety stock level of the said item? 20 bottles 25 bottles 100 bottles 175 bottlesarrow_forward
- Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 97,200 units per year, an ordering cost of $4 per order, and carrying costs of $1.50 per unit. What is the economic ordering quantity? How many orders will be placed during the year? What will the average inventory be? What is the total cost of ordering and carrying inventory?arrow_forwardErgonomics Inc. sells ergonomically designed office chairs. The company has the following information: Average demand = 36 units per day Average lead time = 50 days Item unit cost = $70 for orders of less than 400 units Item unit cost = $68 for orders of 400 units or more Ordering cost = $45 Inventory carrying cost = 25% The business year is 250 days Assume there is no uncertainty at all about the demand or the lead time. Calculate EOQ if unit cost is $70 and $68. (Note: These EOQs do not need to be feasible in theirprice range.) (Round up your answers to the next whole number.) EOQ Unit cost at $70 units Unit cost at $68 units Calculate annual ordering costs for each alternative? (For the first value, use your rounded EOQ from Part a. For the second value, use the lowest feasible order quantity needed to qualify for that price level. Round your answers to 2 decimal places.) Annual Ordering Cost Unit cost at $70 Unit…arrow_forwardMaroons Medical Supplies, Inc. must order masks from its supplier in lots of 1 dozen boxes. Given the information provided below, complete the following table: Annual demand 26,000 dozen Cost per order placed P30 Carrying cost 20% Price per dozen P7.80 Order Size (Dozen) 250 500 1,000 2,000 13,000 26,000 Number of orders Average inventory Carrying cost Order cost Total cost 1. What is the EOQ? Please include/fill the table and solve for EOQ. Thank you so much!arrow_forward
- Peter Sagan is in charge of maintaining hospital supplies at Champs Hospital. During the past year the mean weekly demand for a special type of tubing was 186 packages of this tubing with a standard deviation of 13 packages of tubing. The lead time for receiving this tubing from the supplier is 1.5 weeks. Peter would like to maintain a 95% service level and places an order for 750 packages every time an order is placed. a) How much safety stock should be used for a 95% service level? b) If the weekly demand is 186 and there is a 1.5 week lead time - what is the reorder point (95% service level)? c) How much safety stock should be used for a 99% service level? solve using excelarrow_forwardThe motel replaces broken glasses at a rateof 25 per day. In the past, this quantity has tended to vary normally and have a standard deviationof three glasses per day. Glasses are ordered from a Cleveland supplier. Lead time is normally distributed with an average of 10 days and a standard deviation of 2 days. What ROP should be used toachieve a service level of 95 percent?arrow_forwardAs the Manager of Branson’s Department Store, you are responsible for ensuring that reorder quantities for the various items have been correctly established. You decide to test one item and choose product Z. A continuous review inventory policy has been used, so you examine this as well as other records and come up with the following data: Cost per unit $35 Holding cost 20 percent of unit cost Average daily demand 10 units Ordering cost $30 per order Standard deviation of daily demand 3 units Delivery lead time 4 days Because customers generally do not wait but go elsewhere, you decide on a service probability of 90 percent. Assume that Branson’s Department Store operates 320 days per year. [What is the annual demand (D)? Determine the optimal order quantity, Q*. Determine the reorder point (R) if demand is constant. Determine the reorder point (R) if demand is varies.arrow_forward
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