Question 1 Consider again managing inventory for product 101, provided by Supplier A. Recall thatdemand for 101 is approximately d = 200 units per week. You pay a purchase cost p = $500per unit and value your inventory at r = $550 per unit. You estimate your inventory carry-ing cost rate at r = 18% per year; storing one item of product 101 in your DC requires anequivalent rent (storage cost) of s = $10 per unit per year.Use truckload shipping for your orders of product 101; recall then that your total fixedcost (k + F ) = $900 for any order of size no greater than Q = 700 units. You estimate atotal lead time (order processing plus transit time) of 12 days for these shipments.To reduce your logistics costs, you decide that it might be worthwhile to backorder someof the customer demand you face each cycle. When backordering, you will delay your out-bound shipping of some of your customers’ orders. 4. Under a backordering system, customers who demand units of product from you nearerto the end of your replenishment cycles (just before new orders arrives) will find youout of stock and have their demand backordered. Since backorders happen consistentlyover time, do you think it's reasonable that your customers might learn when theirdemand is likely to be backordered? If they change their demand behavior as a result,do you think demand will necessarily remain constant over time as assumed in ourmodel? In this problem, your company is a distributor of products. You serve as an inventorymanager for the regional distribution center (DC) here in the Atlanta area. In this role,you schedule the purchase and shipment of products from various suppliers inbound to theAtlanta DC. Once you receive the products at the DC, they are stored in inventory untilthey are picked, packed, and shipped outbound to your company's downstream customersin response to orders.We again consider ordering and inventory management for products that each have adedicated supplier from which you order.

Learning and Behavioral Adjustments: Customers might anticipate stockouts and backorders, leading…

Answered: 4. Under a backordering system,…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question 1
Consider again managing inventory for product 101, provided by Supplier A. Recall that
demand for 101 is approximately d = 200 units per week. You pay a purchase cost p = $500
per unit and value your inventory at r = $550 per unit. You estimate your inventory carry-
ing cost rate at r = 18% per year; storing one item of product 101 in your DC requires an
equivalent rent (storage cost) of s = $10 per unit per year.
Use truckload shipping for your orders of product 101; recall then that your total fixed
cost (k + F ) = $900 for any order of size no greater than Q = 700 units. You estimate a
total lead time (order processing plus transit time) of 12 days for these shipments.
To reduce your logistics costs, you decide that it might be worthwhile to backorder some
of the customer demand you face each cycle. When backordering, you will delay your out-
bound shipping of some of your customers’ orders.