Production and Operations Analysis, Seventh Edition
Production and Operations Analysis, Seventh Edition
7th Edition
ISBN: 9781478623069
Author: Steven Nahmias, Tava Lennon Olsen
Publisher: Waveland Press, Inc.
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Chapter 5, Problem 43AP
Summary Introduction

Interpretation:Number of parts to be acquired in advance of 400-day period is to be calculated.

Concept Introduction:

Central Limit Theorem is defined as when a very large sample is taken for evaluation of random variables, it tends to follow normal distribution pattern. Even if part of the sample size does not follow.

It states that sampling distribution of any statistic will be normal, when the size of the sample is large enough.

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RoyalTech'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 ]
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)
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?
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