Recently, you have noticed that demand for product 101 has become a bit more volatile and unpredictable. You decide that you want to start holding some safety stock and operate a (q, r) continuous review inventory policy. For this question, let's assume that backordering is no longer desirable. 1. You decide to use the previous 12 weeks of demand observations to help set the pa- rameters for your models. Suppose those observations of actual demand are: {w1, W2, W11, W12}. .... First, you calculate average weekly demand and use it to estimate the demand rate of your daily demand stochastic process: = ข 7 12 ΣΞι ω; = 12 * 7 Using w, how could you now estimate the daily variance rate o² for your process? \ 2. Suppose that you compute λ = 29 items per day and o² = 70 items² per day. Based. on EOQ calculations, you decide on a reorder quantity of q = 406 items. What is the expected duration of your reorder cycle? 3. What is the expected level of pipeline inventory in this system? Explain using the definition of a (q,r) policy why your inventory position will never drop below your expected level of pipeline inventory.
Recently, you have noticed that demand for product 101 has become a bit more volatile and unpredictable. You decide that you want to start holding some safety stock and operate a (q, r) continuous review inventory policy. For this question, let's assume that backordering is no longer desirable. 1. You decide to use the previous 12 weeks of demand observations to help set the pa- rameters for your models. Suppose those observations of actual demand are: {w1, W2, W11, W12}. .... First, you calculate average weekly demand and use it to estimate the demand rate of your daily demand stochastic process: = ข 7 12 ΣΞι ω; = 12 * 7 Using w, how could you now estimate the daily variance rate o² for your process? \ 2. Suppose that you compute λ = 29 items per day and o² = 70 items² per day. Based. on EOQ calculations, you decide on a reorder quantity of q = 406 items. What is the expected duration of your reorder cycle? 3. What is the expected level of pipeline inventory in this system? Explain using the definition of a (q,r) policy why your inventory position will never drop below your expected level of pipeline inventory.
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...
Related questions
Question
In this problem, your company is a distributor of products. You serve as an inventory
manager for the regional distribution center (DC) here in the Atlanta area. In this role,
you
Atlanta DC. Once you receive the products at the DC, they are stored in inventory until
they are picked, packed, and shipped outbound to your company’s downstream customers
in response to orders.
We again consider ordering and inventory management for products that each have a
dedicated supplier from which you order.
Transcribed Image Text:Recently, you have noticed that demand for product 101 has become a bit more volatile and
unpredictable. You decide that you want to start holding some safety stock and operate a
(q, r) continuous review inventory policy. For this question, let's assume that backordering
is no longer desirable.
1. You decide to use the previous 12 weeks of demand observations to help set the pa-
rameters for your models. Suppose those observations of actual demand are:
{w1, W2, W11, W12}.
....
First, you calculate average weekly demand and use it to estimate the demand rate of
your daily demand stochastic process:
=
ข
7
12
ΣΞι ω;
=
12 * 7
Using w, how could you now estimate the daily variance rate o² for your process?
\
2. Suppose that you compute λ = 29 items per day and o² = 70 items² per day. Based.
on EOQ calculations, you decide on a reorder quantity of q = 406 items. What is the
expected duration of your reorder cycle?
3. What is the expected level of pipeline inventory in this system? Explain using the
definition of a (q,r) policy why your inventory position will never drop below your
expected level of pipeline inventory.
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