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You manufacture kitchen appliances and worry about the cost ofa shut down due to a shortage of parts. You know that for each day you are shut down, it costs you $340,000 in lost salary and production, or $400 per unit per day. Because of this, you have thought that you should have a 97% service level on parts. The parts come as kits from a supplier and all your fiml does is assemble the appliances. Your daily demand is 850 appliances, a volume set by contract, thus there is essentially no demand uncertainty. The lead time for the kits is 10 days, with a standard deviation of lead time of 3 days. Having a kit early costs you $5 per unit per day. You have two options: [1] to have safety stock, or [2] to use safety lead time. Calculate each. How manyunitsofsafety stockwouldyourecommend thatthe firm have? Answer [2) How much days of safety lead time would you recommend that the firm use? Answer

You manufacture kitchen appliances and worry about the cost ofa shut down due to a shortage of parts. You know that for each day you are shut down, it costs you $340,000 in lost salary and production, or $400 per unit per day. Because of this, you have thought that you should have a 97% service level on parts. The parts come as kits from a supplier and all your fiml does is assemble the appliances. Your daily demand is 850 appliances, a volume set by contract, thus there is essentially no demand uncertainty. The lead time for the kits is 10 days, with a standard deviation of lead time of 3 days. Having a kit early costs you $5 per unit per day. You have two options: [1] to have safety stock, or [2] to use safety lead time. Calculate each. How manyunitsofsafety stockwouldyourecommend thatthe firm have? Answer [2) How much days of safety lead time would you recommend that the firm use? Answer

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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You manufacture kitchen appliances and worry about the cost ofa shut down due to a shortage of parts. You know that for each day you are shut down, it costs you $340,000 in lost salary and production, or $400 per unit per day. Because of this, you have thought that you should have a 97% service level on parts. The parts come as kits from a supplier and all your fiml does is assemble the appliances. Your daily demand is 850 appliances, a volume set by contract, thus there is essentially no demand uncertainty. The lead time for the kits is 10 days, with a standard deviation of lead time of 3 days. Having a kit early costs you $5 per unit per day. You have two options: [1] to have safety stock, or [2] to use safety lead time. Calculate each. How manyunitsofsafety stockwouldyourecommend thatthe firm have? Answer [2] How much days of safety lead time would you recommend that the firm use? Answer
Transcribed Image Text:You manufacture kitchen appliances and worry about the cost ofa shut down due to a shortage of parts. You know that for each day you are shut down, it costs you $340,000 in lost salary and production, or $400 per unit per day. Because of this, you have thought that you should have a 97% service level on parts. The parts come as kits from a supplier and all your fiml does is assemble the appliances. Your daily demand is 850 appliances, a volume set by contract, thus there is essentially no demand uncertainty. The lead time for the kits is 10 days, with a standard deviation of lead time of 3 days. Having a kit early costs you $5 per unit per day. You have two options: [1] to have safety stock, or [2] to use safety lead time. Calculate each. How manyunitsofsafety stockwouldyourecommend thatthe firm have? Answer [2] How much days of safety lead time would you recommend that the firm use? Answer
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