EBK PRACTICAL MANAGEMENT SCIENCE
5th Edition
ISBN: 9780100655065
Author: ALBRIGHT
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 12, Problem 48P
Summary Introduction
To determine: The expected annual cost of holding the safety stock.
Inventory and supply chain models:
The functions of inventory and supply chain are one of the most important business decision areas for an organization. The first important aspect of these concepts is to have adequate inventory on hand. The second important aspect is to carry a little amount of inventory as possible.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
An electronics retailer wants to develop an inventory policy to achieve 99% chance of not getting stockouts for a chip. The daily demand for the chip is estimated to be Normal with mean 200 and standard deviation of 20. They count the chip inventory every 2 weeks to place an order, and it takes 11 days for the ordered chips to be delivered. The retailer operates 7 days a week, 365 days a year. They are going to implement an order-up-to model.
A) What base stock level should they choose?
B) What is the number of chips they would have on order (on average)?
C) When they checked their inventory of chips to place a new order, they found that they ran out of stock completely. In addition, they have 10 chips on way to be delivered, while there are five customers who paid for 20 chips in total and are waiting to receive their chips. How many chips should the retailer order?
A large manufacturer purchases a part from a supplier under a continuous review system. The average demand is 400 units a day with a standard deviation of 50 units a day. It costs $55 to process each order.
The holding cost for a part is $0.2 per month and the company has a policy of maintaining a 96% service level. The company operates 315 days per year. The time from when an order is placed to when it arrives at the company from its vendor is 5 days.
a- What is the reorder point?
b- What order quantity would be appropriate
c- What is the total annual cost for this item?
Furnitures sells office chairs ordered from its flagship store. It costs $100
to place an order, and the lead time is two weeks. Demand during lead time is
N(40, 1.96).
in future goodwill. It pays $60 for each chair and sells it for $100. The annual
holding a chair inventory is 30% of its purchase cost.
Furnitures estimates that each stockout causes a loss of $50
a) Assuming that all demand is backlogged, what are the reorder point and the
safety stock level?
b) To meet 99% service objective, what should be the safety stock level for
Type 1 Service? For Type 2 Service?
Chapter 12 Solutions
EBK PRACTICAL MANAGEMENT SCIENCE
Ch. 12.4 - Prob. 1PCh. 12.4 - Prob. 2PCh. 12.4 - Prob. 3PCh. 12.4 - Prob. 4PCh. 12.4 - Prob. 5PCh. 12.4 - Prob. 6PCh. 12.4 - Prob. 7PCh. 12.4 - Prob. 8PCh. 12.4 - Prob. 9PCh. 12.4 - Prob. 10P
Ch. 12.4 - Prob. 11PCh. 12.5 - Prob. 12PCh. 12.5 - Prob. 13PCh. 12.5 - Prob. 14PCh. 12.5 - Prob. 15PCh. 12.5 - Prob. 16PCh. 12.5 - Prob. 17PCh. 12.5 - Prob. 18PCh. 12.5 - Prob. 19PCh. 12.5 - Prob. 20PCh. 12.5 - Prob. 21PCh. 12 - Prob. 27PCh. 12 - Prob. 28PCh. 12 - Prob. 29PCh. 12 - Prob. 30PCh. 12 - Prob. 31PCh. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Prob. 34PCh. 12 - Prob. 35PCh. 12 - Prob. 36PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 42PCh. 12 - Prob. 43PCh. 12 - Prob. 44PCh. 12 - Prob. 45PCh. 12 - Prob. 46PCh. 12 - Prob. 47PCh. 12 - Prob. 48PCh. 12 - Prob. 49PCh. 12 - Prob. 53PCh. 12 - Prob. 54PCh. 12 - In terms of K, D, and h, what is the average...Ch. 12 - Prob. 56PCh. 12 - Prob. 57PCh. 12 - Prob. 58PCh. 12 - Prob. 59PCh. 12 - Prob. 60PCh. 12 - Prob. 61PCh. 12 - Prob. 62PCh. 12 - Prob. 63PCh. 12 - Prob. 64PCh. 12 - Prob. 65PCh. 12 - Prob. 66PCh. 12 - Prob. 67PCh. 12 - Prob. 68PCh. 12 - Prob. 69PCh. 12 - Prob. 70PCh. 12 - Prob. 71PCh. 12 - Prob. 1.1CCh. 12 - Prob. 1.2CCh. 12 - Prob. 1.3C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- The manager of a local retail store is ordering a specialty item from a supplier in Toronto. The lead time is cons days. The store is open 300 days a year (50 weeks Monday-Saturday, with a two-week vacation). The average. is 40 units, with a standard deviation of 7.6. (Assume that the distribution is approximately normal.) It costs $40 to place an Time left 1:45:28 order, and the annual holding cost is 30% of the inventory value. The supplier charges $8.00 per unit. Find the economic order quantity (EOQ). O a. 1788 O b. 346 O c. 36 Od. 632 The manager of a local retail store is ordering a specialty item from a supplier in Toronto. The lead time is constant at five days. The store is open 300 days a year (50 weeks Monday-Saturday, with a two-week vacation). The average daily demand is 40 units, with a standard deviation of 7.6. (Assume that the distribution is approximately normal) It costs $40 to place an order, and the annual holding cost is 30% of the inventory value. The supplier…arrow_forward= A small manufacturing facility stocks a single-use filter, part SUF100, for their production process. It costs the manufacturer $1.50 per filter to purchase and $100 per order placed. They use a holding cost of 28% annually. Monthly demand for SUF100 follows a normal distribution with u 280 and σ = = 77. The parts arrive five months after an order is placed. If a stockout occurs, the demand is backlogged, not lost, and costs the production facility $12.80 per part backordered. 1. Find the optimal order quantity and reorder level to minimize average annual cost of holding, setup, and stockout. 2. What is the average annual cost of holding, setup, and stockouts, when the Q,R-policy in part 1 is used?arrow_forwardDemand for cars is normally distributed with a mean of 2,700 and a standard deviation of 640. The order quantity is 2,625 units. What is the expected sales (in units)?arrow_forward
- Your company currently keeps a safety stock of 554 units of a particular product that has a lead time of 10 days. Records indicate that the weekly demand was as follows: 1176 955 780 1052 736 842 748 993 852 738 794 1444 1333 1372 1106 706 923 734 786 729 1357 1165 1277 683 1106 What is the current service level? Input your result as the decimal form and round to 4 decimal places. You are requested to recommend a safety stock that will ensure an average service level of 97.5%. The lead time is not expected to change. What safety stock would you recommend? (0 decimal places)arrow_forwardRoyalTech's South Jersey warehouse faces a daily demand that is normally distributed, with mean 1,000 and standard deviation 100 pallets. RoyalTech's supplier has a lead-time that is normally distributed, with mean 5 days and standard deviation 1 day. RoyalTech reviews its inventory periodically, that is, every 7 days. (Hint: think about the inventory model appropriate here) RoyalTech's warehouse runs 365 days a year, and the cost of carrying inventory is 18.25% per year. The supplier charges RoyalTech $2,000 per pallet, and $5,000 per delivery. RoyalTech plans to maintain 98% SL. NORMSINV(0.98) = 2.054. L(2.054) = 0.0073. Answer the following questions. 1. How much safety stock should Royal Tech carry? [Select] v pallets. 2. What is RoyalTech's average inventory? [ Select ] pallets. 3. What is the total relevant cost incurred by RoyalTech per day? $ [ Select] 4. What is the Fill Rate that RoyalTech is able to achieve for this service level? [ Select ]arrow_forwardA firm that sells 5,000 blivets per month is trying to determine how many blivets to keep in inventory. The financial manager has determined that it costs $200 to place an order.The cost of holding inventory is 4 cents per month per average blivet in inventory. A five-day lead time is required for delivery of goods ordered. (This lead time is known with certainty.) The operating days per year is 250. What is the economic order quantity? What is the reorder point? At the EOQ level, what is the total carrying cost per month? At the EOQ level, what is the total ordering cost per month?arrow_forward
- 3) A company produces a part that is used in its production process. The company produces the part at a rate of 300 units per day. The daily demand for the product is 180 units. The annual demand for the part is 54,000 units and occurs consistently over the 300 days that the company operates yearly. The company incurs a setup cost of $300 each time the item is produced. The cost of carrying the item in inventory is estimated to be 25 percent of the item's $100 cost. How many units should the company produce each production run to minimize its inventory- associated costs?arrow_forwardThe injection molding department of a company uses an average of 30 gallons of special lubricanta day. The supply of the lubricant is replenished when the amount on hand is 170 gallons. It takesfour days for an order to be delivered. Safety stock is 50 gallons, which provides a stockout risk of9 percent. What amount of safety stock would provide a stockout risk of 3 percent? Assumenormality.arrow_forwardGyona purchases meat from the local supermarket at $5 per kilo and sell it at $9 per kilo. any unsold meat is sold to the Chinese restaurant near by at $2 per kilo. Gyona is sure that the demand follows a normal distribution with a mean of 100 kilograms and a standard deviation of 15 kilograms. - How many kilograms should she order each day?arrow_forward
- A wallpaper company estimates the demand for a certain pattern to be 925 rolls per year. It costs $750 to set up the presses to print the pattern, plus $150 to print each roll. If the company can store a roll of wallpaper for a year at a cost of $4, how many rolls should it print at a time and how many printing runs on average will it need in a year to minimize production costs? (Assume the wallpaper sells steadily throughout the year, and the company reorders more whenever the stock runs out. Round the number of rolls per print to the nearest whole number and the average number of printing runs per year to two decimal places.) rolls per print rolls print runs per year runsarrow_forwardA retailer uses the order-up-to model to manage inventory of an item in a store. The leadtime for replenishments is four weeks and it can place orders weekly. Weekly demand isPoisson with mean 0.10 unit. Its order-up-to level is five and unfilled demand is backordered. What is the coefficient of variation of its orders?arrow_forwardA plastic canister manufacturing company maintains an annual safety stock of 500 units of plastic caps. If the company places an annual purchase order for 1,800 units of these caps, its average annual inventory, in units, is between: ( )1,500 and 1,300 ( )3,200 and 3,000 ( )2,400 and 2,200 ( )1,200 and 1,000 ( )1,900 and 1,700arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Operations ManagementOperations ManagementISBN:9781259667473Author:William J StevensonPublisher:McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi...Operations ManagementISBN:9781259666100Author:F. Robert Jacobs, Richard B ChasePublisher:McGraw-Hill Education
Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning
Production and Operations Analysis, Seventh Editi...Operations ManagementISBN:9781478623069Author:Steven Nahmias, Tava Lennon OlsenPublisher:Waveland Press, Inc.
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Operations Management
Operations Management
ISBN:9781259667473
Author:William J Stevenson
Publisher:McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi...
Operations Management
ISBN:9781259666100
Author:F. Robert Jacobs, Richard B Chase
Publisher:McGraw-Hill Education
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Production and Operations Analysis, Seventh Editi...
Operations Management
ISBN:9781478623069
Author:Steven Nahmias, Tava Lennon Olsen
Publisher:Waveland Press, Inc.
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY