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Inventory Homework Problems
Inventory Homework Problems
continuously. How much safety inventory of cell phones should Best Buy carry? What should
its ROP be?
Problem 6 (10 points). Reconsider the Best Buy in Previous problem. The store manager has
decided to follow a periodic review policy to manage inventory of cell phones. She plans to
order every three weeks. Given a desired CSL of 95 percent, how much safety inventory should
the store carry?
Problem 7 (30 points). Epson produces printers in its Taiwan factory for sale in Europe.
Printers sold in different countries differ in terms of power supply as well as the language of the
manuals. Currently, Epson assembles and packs printers for sale in individual countries. The
distribution of weekly demand in different countries is normally distributed, with means and
standard deviations as shown in the table below.
Country
France
Germany
Spain
Italy
Portugal
UK
Mean Demand
3,000
4,000
2,000
2,500
1,000
4,000
Standard deviation
2,000
2,200
1,400
1,600
800
2,400
a) Compute safety stock without aggregation given that the base printers are to be
manufactured in Taiwan with a lead time of eight weeks.
b) Now Epson decides to build a central DC in Europe. Assume demand indifferent
counties to be independent, i.e. correlation is zero. Given that lead time from the Taiwan
factory to the central DC is eight weeks, how much safety inventory does Epson require
in Europe if it targets CSL of 95%?
c) Compute safety stock that Epson carries as a result of building a European DC if
correlation is all identically 0.2 given eight weeks of lead time from Taiwan with CSL of
95%
Problem 8 (10 points). Teddy Bower is an outdoor clothing and accessories chain that purchases
a line of parkas at $10 each from its Asian supplier, TeddySports, Unfortunately, at the time of
order placement, demand is still uncertain. Teddy Bower forecasts that its demand is normally
distributed with mean of 2,100 and standard deviation of 1,200. Teddy Bower sells these parkas
at $22 each. Assumer unsold parkas have value of $2. Decide an optimal production amount of
Teddy Bower.