Inventory prolems used in Video Tutorial (1)
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School
New York Institute of Technology, Westbury *
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Course
630
Subject
Industrial Engineering
Date
Dec 6, 2023
Type
docx
Pages
3
Uploaded by BaronScience12487
6.21 Barbara Bright is the purchasing agent for West
Valve Company. West Valve sells industrial valves
and fluid control devices. One of the most popular
valves is the Western, which has an annual demand
D = 4000 units/year
of 4,000 units. The cost of each valve is $90, and the
C = $90 per valve
inventory carrying cost is estimated to be 10% of
I = 10%
the cost of each valve. Barbara has made a study of
the costs involved in placing an order for any of the
valves that West Valve stocks, and she has concluded
that the average ordering cost is $25 per order.
Co = $25/ order
Furthermore, it takes about two weeks for an
L = 2 weeks
order to arrive from the supplier, and during this
weekly
d = 80 valves/day
time the demand per week for West valves is approximately
or # of weeks/year = 50
80.
(a) What is the EOQ? 149 items/order
(b) What is the ROP? 160 items
(c) What is the average inventory? What is the
annual holding cost?
Average Inventory
74.535599
items
Annual Holding Cost
670.82039
$/year
(d) How many orders per year would be placed?
What is the annual ordering cost?
26.8 orders
Annual Ordering
Cost
670.82039
$/year
6-33 Jim Overstreet, inventory control manager for Itex,
receives wheel bearings from Wheel-Rite, a small
producer of metal parts. Unfortunately, Wheel-Rite
can only produce 500 wheel bearings per day. Itex
P= 500/day
receives 10,000 wheel bearings from Wheel-Rite
each year. Since Itex operates 200 working days
each year, its average daily demand for wheel bearings
is 50. The ordering cost for Itex is $40 per
order, and the carrying cost is 60 cents per wheel
bearing per year. How many wheel bearings should
Itex order from Wheel-Rite at one time? Wheel-Rite
has agreed to ship the maximum number of wheel
bearings that it produces each day to Itex when an
order has been received.
6-34 North Manufacturing has a demand for 1,000 pumps
D = 1000 itemsa/yr
each year. The cost of a pump is $50. It costs North
C = $50/unit
Manufacturing $40 to place an order, and the carrying
Co + $40/order
cost is 25% of the unit cost. If pumps are ordered
I = 25%
in quantities of 200, North Manufacturing can get a
3% discount on the cost of the pumps. Should North
Manufacturing order 200 pumps at a time and take
the 3% discount?
What would a fair discount with a supply chain partner?
Current total cost
51,000
Goes down to $49,913/year
6-xx
A company can get following
discount
For its purchases:
ORDER
UNIT COST ($)
60 items or less
18.00
61 to 99 items
17.50
100 or more items
17.25
The company
has an ordering
cost of $5. The carrying cost is 20%, and the annual
demand is 1000 sheets. What do you recommend?
Q
TC
Price $ 18
53
18190
Price $17.50
61
17689
Price $17.25
100
17473
Probabilistic Models
Two types of Problems
Type 1 Given stockout Probability or Service Level find ROP or Safety stock
Solution Using Excel:
ROP = NORMINV(Service Level, Mean LT Demand, Std Dev of LT Demand)
Type 2 Given Safety Stock or ROP find Service Level or Stock out probability
Solution Using Excel:
Service Level = NORMDIST(ROP, Mean LT Demand, Std Dev of LT Demand, 1)
Service Level + Stock out Probability = 1
ROP = Mean LT Demand + Safety Stock
6-35 Linda Lechner is in charge of maintaining hospital
supplies at General Hospital. During the past year,
the mean lead time demand for bandage BX-5 was
60. Furthermore, the standard deviation for BX-5
was 7. Linda would like to maintain a 90% service
level. What safety stock level do you recommend for
BX-5?
6-43 H & K Electronic Warehouse sells a 12-pack of
AAA batteries, and this is a very popular item.
Demand for this is normally distributed, with an
average of 50 packs per day and a standard deviation
of 16. The average delivery time is 5 days, with a
standard deviation of 2 days. Delivery time has been
found to be normally distributed. A 96% service
level is desired.
(part a) What is the standard deviation of demand during
the lead time?
106.2
(part b) How much safety stock should be carried, and
what should be the reorder point? SS = 186
ROP = 436
( part c) If H& K keeps
a safety Stock of 60 AAA batteries What will be Service level?
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