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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