A regional distributor purchases discontinued appliances from various suppliers and then sells them on demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Only when it is open for business can orders be received. The following data are estimated for a counter-top mixer: Average daily demand 1d2 = 100 mixers Standard deviation of daily demand 1sd2 = 30 mixers Lead time 1L2 = 3 days Holding cost 1H2 = $9.40>unit>year Ordering cost 1S2 = $35>order Cycle@service level = 92 percent The distributor uses a continuous review Q system. a. What order quantity Q, and reorder point, R, should be used? b. What is the total annual cost of the system? c. If on-hand inventory is 40 units, one open order for 440 mixers is pending, and no backorders exist, should a new order be placed?
A regional distributor purchases discontinued appliances from various suppliers and then sells them on demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Only when it is open for business can orders be received. The following data are estimated for a counter-top mixer:
Average daily demand 1d2 = 100 mixers
Standard deviation of daily demand 1sd2 = 30 mixers
Lead time 1L2 = 3 days
Holding cost 1H2 = $9.40>unit>year
Ordering cost 1S2 = $35>order
Cycle@service level = 92 percent
The distributor uses a continuous review Q system.
a. What order quantity Q, and reorder point, R, should be used?
b. What is the total annual cost of the system?
c. If on-hand inventory is 40 units, one open order for 440 mixers is pending, and no backorders exist, should a new order be placed?
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