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s, fixed order cost per order is $100, each =), what should be the safety stock value?

s, fixed order cost per order is $100, each =), what should be the safety stock value?

Practical Management Science
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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**Inventory Management Example: Safety Stock Calculation** **Problem Statement:** A retailer experiences a weekly demand for DVDs that is normally distributed with a mean of 1,000 boxes and a standard deviation of 150 boxes. The current process involves placing orders with the supplier, which require a replenishment lead time of 4 weeks. Each order incurs a fixed cost of $50, and each box costs the retailer $10. The holding cost is 25% per year of the inventory. The objective is to achieve a 99.5% service level. To calculate the appropriate safety stock value, use the z-value found in Table 23.4 (found on page 400 of the referenced textbook). **Numeric Response:** The calculated safety stock value is **772.8**. (Note: Assume that all calculations are based on standard inventory management formulas and statistical methods to achieve the specified service level.)
Transcribed Image Text:**Inventory Management Example: Safety Stock Calculation** **Problem Statement:** A retailer experiences a weekly demand for DVDs that is normally distributed with a mean of 1,000 boxes and a standard deviation of 150 boxes. The current process involves placing orders with the supplier, which require a replenishment lead time of 4 weeks. Each order incurs a fixed cost of $50, and each box costs the retailer $10. The holding cost is 25% per year of the inventory. The objective is to achieve a 99.5% service level. To calculate the appropriate safety stock value, use the z-value found in Table 23.4 (found on page 400 of the referenced textbook). **Numeric Response:** The calculated safety stock value is **772.8**. (Note: Assume that all calculations are based on standard inventory management formulas and statistical methods to achieve the specified service level.)
**Inventory Management Problem Statement:** A retail store is facing a challenge in managing its inventory of DVDs. The demand for DVDs is normally distributed with a mean of 1000 boxes per week and a standard deviation of 150 boxes. **Current Supply Chain:** - Orders are placed weekly. - Replenishment lead time is 4 weeks. - Fixed order cost per order is $100. - Each box costs $1.20. - The inventory holding cost is $0.25 per week for each box. **Objective:** Calculate the approximate service level with a safety stock of 300 boxes. (Round your answer to two decimal places). **Numeric Response Required:** - Answer box provided for entering the service level percentage. Please solve this problem considering the above parameters and calculate the service level accordingly.
Transcribed Image Text:**Inventory Management Problem Statement:** A retail store is facing a challenge in managing its inventory of DVDs. The demand for DVDs is normally distributed with a mean of 1000 boxes per week and a standard deviation of 150 boxes. **Current Supply Chain:** - Orders are placed weekly. - Replenishment lead time is 4 weeks. - Fixed order cost per order is $100. - Each box costs $1.20. - The inventory holding cost is $0.25 per week for each box. **Objective:** Calculate the approximate service level with a safety stock of 300 boxes. (Round your answer to two decimal places). **Numeric Response Required:** - Answer box provided for entering the service level percentage. Please solve this problem considering the above parameters and calculate the service level accordingly.
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