Q5: TechGear did not use Jane's proposal and decided to stay with the current vendor. The management recently has been selling the product in boxes, where a box includes 10 units. After looking into the sale data of 250 observations for a reorder period (or lead time, i.e., 3 business days), only 6 situations were found: either 21 boxes, 22 boxes, 23 boxes, 24 boxes, 25 boxes, or 26 boxes had been sold during a reorder period. The frequencies for each situation are listed below. The management has been using the above ROP in Q2 (ROP = 240). To achieve a service level of 90% or better, the management calculated the minimum safety stock (SS) needed (such SS = 0 if it is not needed). With this SS, there may be an impact on the inventory costs for the year due to the above safety stock. Is this possible impact an increase or decrease in the inventory costs of the year? What is the most possible amount of this impact (in $)? Boxes sold Units sold Frequency (observations) 21 210 20 22 220 30 23 230 45 24 240 105 25 250 30 26 260 20
Q5: TechGear did not use Jane's proposal and decided to stay with the current vendor. The management recently has been selling the product in boxes, where a box includes 10 units. After looking into the sale data of 250 observations for a reorder period (or lead time, i.e., 3 business days), only 6 situations were found: either 21 boxes, 22 boxes, 23 boxes, 24 boxes, 25 boxes, or 26 boxes had been sold during a reorder period. The frequencies for each situation are listed below. The management has been using the above ROP in Q2 (ROP = 240). To achieve a service level of 90% or better, the management calculated the minimum safety stock (SS) needed (such SS = 0 if it is not needed). With this SS, there may be an impact on the inventory costs for the year due to the above safety stock. Is this possible impact an increase or decrease in the inventory costs of the year? What is the most possible amount of this impact (in $)? Boxes sold Units sold Frequency (observations) 21 210 20 22 220 30 23 230 45 24 240 105 25 250 30 26 260 20
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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Q5: TechGear did not use Jane's proposal and decided to stay with the current vendor. The management recently has been selling the product in boxes, where a box includes 10 units. After looking into the sale data of 250 observations for a reorder period (or lead time, i.e., 3 business days), only 6 situations were found: either 21 boxes, 22 boxes, 23 boxes, 24 boxes, 25 boxes, or 26 boxes had been sold during a reorder period. The frequencies for each situation are listed below.
The management has been using the above ROP in Q2 (ROP = 240). To achieve a service level of 90% or better, the management calculated the minimum safety stock (SS) needed (such SS = 0 if it is not needed). With this SS, there may be an impact on the inventory costs for the year due to the above safety stock. Is this possible impact an increase or decrease in the inventory costs of the year? What is the most possible amount of this impact (in $)?
| Boxes sold | Units sold | Frequency (observations) |
| 21 | 210 | 20 |
| 22 | 220 | 30 |
| 23 | 230 | 45 |
| 24 | 240 | 105 |
| 25 | 250 | 30 |
| 26 | 260 | 20 |
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