Question 2: Your firm uses a periodic review system for all SKUs classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics are: Demand (D) = x1 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = x2 weeks Cycle service level = 95 percent Demand is normally distributed, with a standard deviation of weekly demand of 64 units. a. Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item (round P to nearest integer) b. Which system requires more safety stock and by how much?
Question 2: Your firm uses a periodic review system for all SKUs classified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics are: Demand (D) = x1 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = x2 weeks Cycle service level = 95 percent Demand is normally distributed, with a standard deviation of weekly demand of 64 units. a. Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item (round P to nearest integer) b. Which system requires more safety stock and by how much?
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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X1= 29000
X2= 5
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![Question 2: Your firm uses a periodic review system for all SKUs classified, using ABC
analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as
A items. The demand for a specific SKU, currently classified as an A item, has been dropping.
You have been asked to evaluate the impact of moving the item from continuous review to
periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics
are:
Demand (D) = x1 units/year
Ordering cost (S) = $125.00/order
Holding cost (H) = $3.00/unit/year
Lead time (L) = x2 weeks
Cycle service level = 95 percent
Demand is normally distributed, with a standard deviation of weekly demand of 64 units.
a. Use the EOQ to define the parameters of an appropriate continuous review and periodic
review system for this item (round P to nearest integer)
b. Which system requires more safety stock and by how much?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa17f9023-1421-4642-8114-70f4142ecf5c%2F70a1e382-666b-4d22-a334-a7e5ee922891%2Fm4rmn38_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 2: Your firm uses a periodic review system for all SKUs classified, using ABC
analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as
A items. The demand for a specific SKU, currently classified as an A item, has been dropping.
You have been asked to evaluate the impact of moving the item from continuous review to
periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics
are:
Demand (D) = x1 units/year
Ordering cost (S) = $125.00/order
Holding cost (H) = $3.00/unit/year
Lead time (L) = x2 weeks
Cycle service level = 95 percent
Demand is normally distributed, with a standard deviation of weekly demand of 64 units.
a. Use the EOQ to define the parameters of an appropriate continuous review and periodic
review system for this item (round P to nearest integer)
b. Which system requires more safety stock and by how much?
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