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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) = 21000 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = 3 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. b. Which system requires more safety stock and by how much? %3D %3D %3D %3D

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) = 21000 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = 3 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. b. Which system requires more safety stock and by how much? %3D %3D %3D %3D

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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Your firm uses a periodic review system for all SKU 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) = 21000 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = 3 weeks Cycle service level = 95 percent Demand is normally distributed, with a standard deviation of weekly demand of 64 units. %3D %3D a. Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item. b. Which system requires more safety stock and by how much?
Transcribed Image Text:Your firm uses a periodic review system for all SKU 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) = 21000 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = 3 weeks Cycle service level = 95 percent Demand is normally distributed, with a standard deviation of weekly demand of 64 units. %3D %3D a. Use the EOQ to define the parameters of an appropriate continuous review and periodic review system for this item. b. Which system requires more safety stock and by how much?
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