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MGMT 615 -Transportation and Logistics Management

Assignment No.1
Requirement-1. Determine the review period (RP).
Solution.
RP (Periodic Review Period) = EOQ / d
Where,
EOQ (Economic Order Quantity) = 75 units
d (Average Demand for the Item) = 18 units / week
RP = EOQ / d = 75 / 18 = 4.2 or 4 weeks

Requirement-2. Determine the total inventory (TI) for 90% service level.
Solution.
TI (Total Inventory) = d(RP + L) + SS
As,
d (Average Demand for the Item) = 18 units / week
RP = 4 weeks
L (Lead Time) = 2 weeks
For a 90 percent cycle-service level,

Safety Stock SS = Z 90σRP+L

z90 = 1.28

σ RP+L = σ d RP+L =5 6 =5(2.45)=12.25 units

Safety Stock SS = Z 90σRP+L  1.28(12.25) = 15.68 or 16 units

Now,

TI = d(RP + L) + SS = 18 (4 + 2) + 16 = 124 units

Requirement-3. Determine the decision point for MS Traders for P & Q system?
Solution.

• Primary Advantages of Q Systems

• Review frequency may be individualized
• Fixed lot sizes can result in quantity discounts
• Lower safety stocks
• Primary Advantages of P Systems
• Convenient
• Orders can be combined
• Only need to know IP when review is made
• Use simulation when both demand and lead time are variable
• Suitable to single-bin systems
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• Total costs for the P system are the sum of the same three cost elements as in the Q
system
• Order quantity and safety stock are calculated differently