Concept explainers
Your firm uses a continuous review system and operates 52 weeks per year. One of the SKus has the following characteristics.
Demand is
Current on-hand inventory is 1,040 units, with no
- Calculate the item’s EOQ. What is the average time, in weeks, between orders?
- Find the safety stock amid reorder point that provide a 95 cycle-service level.
- For these policies, what are the annual costs of (i) holding the cycle inventory and (ii) placing orders?
- A withdrawal of 15 units just occurred. Is it time to reorder? If so, how much should be ordered?
Want to see the full answer?
Check out a sample textbook solutionChapter 9 Solutions
Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
Additional Business Textbook Solutions
Loose-leaf for Operations Management (The Mcgraw-hill Series in Operations and Decision Sciences)
Operations Management, Binder Ready Version: An Integrated Approach
Business in Action (8th Edition)
Operations Management
Operations Management: Sustainability and Supply Chain Management (12th Edition)
OPERATIONS MANAGEMENT IN THE SUPPLY CHAIN: DECISIONS & CASES (Mcgraw-hill Series Operations and Decision Sciences)
- The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.arrow_forwardA service garage uses 120 boxes of cleaning cloths a year. The boxes cost $6 each. Ordering cost is $3 and holding cost is 10 percent of purchase cost per unit on an annual Determine: The economic order quantity The total cost of carrying the cloths (excluding purchase price) The average inventoryarrow_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
- A local TV repairs shop uses 36,000 units of a part each year (A maximum consumption of 100 units per working day). It costs RM20 to place and receive an order. The shop orders in lots of 400 units. It cost RM4 to carry one unit per year of inventory. Calculate total annual ordering cost Calculate total annual carrying cost Calculate total annual inventory cost Calculate the Economic Order Quantity Calculate the total annual cost inventory cost using EOQ inventory Policy How much is the saving if using EOQ? Compute re-ordering point assuming the lead time is 3 days.arrow_forwardI need answers A company uses on an average 216 parts a day with a standard deviation of 16 parts per day in a manufacturing process. Cost of placing and receiving an ordering is BDT 40,000. Estimated monthly carrying cost is BDT 90 per part. Orders are delivered approximately 7 days after being placed. The delivery time is normal with a mean of 7 days and a standard deviation of 2 days. The company is open 360 days per year. Find the order quantity that is economical. If the Company takes 3% stock out risk, then find safety stock (SS) quantity and Re-Order Point? 3.If the supplier offers a discount of BDT 8 per circuit board for purchasing of 4000 boards at a time, then financially evaluate and justify whether the company will go with the offer or not? 4.The person who orders the boards follows this rule: Order when the amount on…arrow_forwardThe Strawberry Bread Company buys and then sells (as bread) 2.6 million bushels of wheat annually. The wheat must be purchased in multiples of 2,000 bushels. Ordering costs, which include grain elevator removal charges of P3,500, are P5,000 per order. Annual carrying costs are 2 percent of the purchase price of P5 per bushel. The company maintains a safety stock of 200,000 bushels. The delivery time is 6 weeks. What is the EOQ? What are the total inventory costs, including the costs of carrying the safety stock? The wheat processor agrees to pay the elevator removal charges if Strawberry Bread will purchase wheat in quantities of 650,000 bushels. Would it be to Strawberry Bread's advantage to order under this alternative?arrow_forward
- The following information regarding inventory policy was assembled by the GB Inc. The company uses a 50-week year in all calculations: Sales: 10,000 units per year Order quantity: 2,000 units Safety stock: 1,300 units Lead time: 4 weeks The reorder point is: 3,300 units 2,100 units 100 units 1,300 unitsarrow_forwardConsider a periodic review system, where orders are placed every 20 days. The firm strives to provide a 94.41% cycle service level. Demand averages 415 units per day, and the standard deviation of demand per day is 105 units. Lead time is 12 days (round Z-values, standard deviations to two decimal places). Question content area bottom Part 1 a. How many units of safety stock should be held? enter your response here units (round your response to the nearest integer). b. What should the target inventory level (order-up-to level) be? enter your response here units (round your response to the nearest integer). c. Suppose that it is time to review the item. There are 152 units in inventory, and there is an outstanding backorder for 455 units. An order for 129 units is on the way. How many units should be ordered now? enter your response here units (round your response to the nearest integer).arrow_forwardPetromax Enterprises uses a continuous review inventorycontrol system for one of its SKUs. The following informationis available on the item. The firm operates 50 weeks in a year.Demand = 50,000 units>yearOrdering cost = $35>orderHolding cost = $2>unit>yearAverage lead time = 3 weeksStandard deviation of weekly demand = 125 unitsa. What is the economic order quantity for this item?b. If Petromax wants to provide a 90 percent cycle-servicelevel, what should be the safety stock and the reorder point?arrow_forward
- Use the information below for the following questions: Knights Corporation also needs to determine the proper reorder point and safety stock level. Annual Demand = 15000 gallons Lead Time = 15 days Standard deviation of lead time = 3 days Standard deviation of demand = 10 gallons Service Level = 96% (Z score of 1.75 or 1.76) Open days per year = 360 days 1. What is the reorder point? (keep two decimal places through your work, round your final answer up to the next highest whole number) 2.What is the safety stock? (keep two decimal places through your work, round your final answer up to the next highest whole number) 3. If the service level increased to 99% (Z score of 2.32 or 2.33), what would be the new safety stock? (keep two decimal places through your work, round your final answer up to the next highest whole number)arrow_forwardA local distributor for a national tire company expects to sell approximately 9,600 steelbelted radial tires of a certain size and tread design next year. Annual carrying cost is $16per tire, and ordering cost is $75. The distributor operates 288 days a year.a. a. What is the EOQ?arrow_forwardthe company expects to sell 19,200 units next year. it operates 360 days a year. annual carrying cost is P32 per unit ordering cost is P150. A. what is the length of an order cycle in days? (4 decimals) B. what is the total annual cost at EOQ? show solutionarrow_forward
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning