Isvetony Cowra chapuer 15 a7 fina tegen em 158] an yoiteto to mode. Safety stock cleation 1159] ss=in ‘Pomodel. Safety stock caleultion 1510) SSH sors, ‘P-model. Optimal order quantity in fined-period system with a review period of T days and lead ime of L days, sm] a= UT +L) + core 1 ‘P-model. Standard deviation of a series of independent demands over the review period T and ead time L. siz} orn = |Doek 1513] Average inventory value = (Q/2 + SVC 1514] Inventory tum = PC Di (@A+INC ~ ORFS ‘sel, Opti order uansy base onan oer cst olin cot a perenag (othe tent (Ch P05 1s} o- (= SOLVED PROBLEMS SOLVED PROBLEM 1 ‘A pode is priced 10 sll at $100 per unit, and its ost is constant $70 per unit. Each unsold unit has a salvage value of $20. Demand i expected to rnge between 35 and 40 units forthe period, 38 Aen can be sold and no units over 40 wil be sold. The demand probbiles andthe associated ‘cumulative probability distribution () fo this situation are shown below. Nunwer Phonan ery Uns oTus CuMuLATE Dawes Dea jonny 2% ° 0 6 6 25 a 25 0 8 25 8 = 8 oo Excel: ” © co Inventory ‘contrat ow many units shouldbe ordered? Solution ‘The cost of underestimating demand isthe loss of profit, oF C, = $100 ~ $70 $30 per unit, The cost of overestimating demand isthe fs incurred when the uit must be wld at salvage value, C, S10 $20= $50. ‘The optima probability of not being sold G 0 "SEG +30 From the distribution data above, his corresponds tothe 370 anit a7os section ¢ Praxwne ann Contino ane TH: SuPpty CHAIN “The flloming is fall marginal analysis forthe problem. Note that dhe minimum cos is when 237 units are purchased onan oF Uses Prac4sen vars Dawn Prmamry 35367 3% or om mm mm a 8 osm a or ee 38 25 0 9 ) rs oem Tote nS 8 8 SOLVED PROBLEM 2 ‘tems purchase from a vendor cost S20 each, an the forecast for next year's demand 1,000 unit. rit cous $$ everytime an orders placed for more nis andthe storage cost is per unit per year, ‘what quantity should be ordered each ime? ‘4. What isthe ttl ordering eos fora year? fy Whats the total storage cost fra year? Solution “The quantity tobe ordered each time is (20s _ fo et 4 a, The total ordering cost fora yea is 1, The storage cost fora years SOLVED PROBLEM 3 Daily demand fora products 120 nis, witha standard deviation of 30 units. The eview period is ‘days and the lead time is 7 day At the ime of review, 130 units rein tok. I only aT peteent risk of stocking out is acceptable how many units should be ordered? Solution orse = VET DOOR = VTE900 = 1375 233 andr +1) bore ~ = 120(18-47)4+2.23(137.5)~ 130 =2,710 unis h@® SOLVED PROBLEM 4 ‘A company curently his 200 units of «product on hand that it orders every two weeks when the falesperson visits the premises, Demand forthe product averages 20 units per day witha standard tleviation of 5 unt. Lead time forthe product to arrives even ays. Management his a goal of & 95 percent probability of ot stocking cut for his prec. ‘The salesperson is duc to come inl this afternoon when 180 units are left in stock (assuming hat 20 ate wld tay), How many units sould be ordered?” leInvetony Coyraor ehapier 15 69 Solution Given 1 orse = VAP = 28 6 i+) +20r94 ~ 20(14 +7) + 1.64023) — 180 8 nits REVIEW AND DISCUSSION QUESTIONS 1 Distinguish between dependent and independent demand in a McDonal's resturant, in an integrated manufacturer of personal copiers, and in 3 pharmaceutical supply house Distinguish between in: proess inventory, safety stock inventory, and seasonal inventory, Discus the mature ofthe cost tha affect inventory size. ‘Under which conditions would plant manager elec o use a fixed-order quantity model as ‘oppored oa fxed-tme period model? What are the disadvantages of wsng a fxed-time period ‘ordering system? ‘5 iscussthe general procedure fr determining the order quantity when price breaks ae involved ‘Would here he any differences in procedure holding cont wor a fixed percentage of price rather than a constant amount? {6 What vo basic questions must be answered by an inventory-conrol decision rle? 7. Discuss the assumptions that are inerent in production setup ost, oering cost, and carrying costs, How vali are they? '8 “The nice thing about inventory models that you can pull one of the self and apply it so Jong as your cos estimates are aevurte.” Comment ‘9 Which typeof inventory system wuld you use i the following situations? ‘a. Supplying your kitchen with fresh foe. 2. Obtaining 2 daily newspaper. Buying gas for your ear. “To which ofthese tems do you impute the highest tockout cst? 10. Why ist desirable to casi items into groups s the ABC classification does? 11 What kind of policy or procedure would you recommend to improve the iventcry eperation in 4 department sore? What advantages and disadvantages does your system have visi the ‘department store inventory operation described in his chapter? PROBLEMS 1 ‘The local supermarket buys luce each day to ensure really fesh produce. Each morning any lettuce that islet fom the previous day is sold toa dealer that resels it to farmers who use i ‘to feed their animals. This week the supermarket can buy feshJemuce for $4.00 a box. The lt tue is sold for $10.00 a box and the dealer thi els bd lettuce is wiling to pay S150 a box, Past history says that tomorrow's demand for Ice averages 250 boxes with a standard dev ation of 4 boxes. How many boxes of lettuce should the supermarket purchase tomorrow? 2 Next week, Super Discount Airlines has fight from New York to Los Angoes that wil be booked to capacity The aie knows fom past history that an average of 25 customers (with standard deviation of 15) cance thee reservation or donot show for the flight. Revenue from 3 ticket onthe ight is $125. Ihe fights overbooked the aline asa policy of geting the cus- tomer on the next waiable fight and giving the person fee round-up ket ona fue Might ‘The cost of this fre round trp ticket averages $250, Super Discount considers the cos of fying the plane fom New York to Los Angeles a sunk cost. By how many seats should Super Discount ‘overtook the ight? 3 Ray's SueliteEmporiam wishes o determine the best order size for its best selling satelite ish ‘model TS111), Ray has estimated the annual demand fr tis model at 1,000 units. His costo ‘ary one units $100 pe year per unit and e has estimated that each ode costs $25 to pace {sing the EOQ model, how many should Ray order eich time? 4 Dunstrets Department Store would like to develop an inventory owering policy of a 95 pr ent probability of aot stocking out To illasate your recommended procedure, we a8 an e¥am ple te ordering policy for white prcale sheets. ‘Demand fr white prea sheets is 5,000 per yea, The store is open 365 days per yar Every to weeks (14 days) inventory i counted and a new order is placed. I takes 10 days for the