Chapter 11 - Chapter 11 Managing Economies of Scale in the...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 11: Managing Economies of Scale in the Supply Chain: Safety Inventory Exercise Solutions 1. D L = LD = (2)(300) = 600 σ L = σ D L = ) 200 ( 2 = 283 ss = F S-1 ( CSL ) × σ L = F S-1 (0.95) × 283 = 465 (where, F S-1 (0.95) = NORMSINV (0.95)) ROP = DL + ss = 600 + 465 = 1065 Excel Worksheet 11-1 illustrates these computations 2. D L = (T+L) D = (2+3)(300) = 1500 σ L = σ D L T + = ) 200 ( 3 2 + = 447 ss = F S-1 ( CSL ) × σ L = F S-1 (0.95) × 447 = 736 (where, F S-1 (0.95) = NORMSINV (0.95)) OUL = D(T+L) + ss = 1500 + 736 = 2236 Excel Worksheet 11-2 illustrates these computations 3. D L = LD = (2)(300) = 600 σ L = σ D L = ) 200 ( 2 = 283 ESC = (1 – fr ) Q = (1 – 0.99)500 = 5 We use the following expression to determine the safety stock (ss): ) ( )] ( 1 [ σ σ σ L S L L S ss f ss F ss ESC +-- = ESC = – ss [1 – NORMDIST ( ss / σ L , 0, 1, 1)] + σ L NORMDIST ( ss / σ L , 0, 1, 0). We utilize the GOALSEEK function in EXCEL in determining safety stock (ss) by using ss as the changing value that results in an ESC value of 5. 1 Excel Worksheet 11-3 illustrates these computations. Goal Seek set-up: SET CELL: C29 TO VALUE: 5 BY CHANGING CELL: C27 This results in an ss value of 477 and the reorder point of: ROP = DL + ss = 600 + 477 = 1,077 4. D L = LD = (2)(250) = 500 σ L = σ D L = ) 150 ( 2 = 212 ss = ROP – ss = 600 – 500 = 100 CSL = F(D L + ss, D L , σ L ) = F (600, 500, 212) = NORMDIST (600, 500, 212, 1) = 0.68 ) ( )] ( 1 [ σ σ σ L S L L S ss f ss F ss ESC +-- = ESC = – ss [1 – NORMDIST ( ss / σ L , 0, 1, 1)] + σ L NORMDIST ( ss / σ L , 0, 1, 0) = 43.86 Fill rate (fr) = 1- (ESC/Q) = 1- (43.86/1000) = 0.96 Excel Worksheet 11-4 illustrates these computations 5. D L = LD = (2)(250) = 500 σ L = s D L L D 2 2 2 + σ = 5 . 1 250 150 2 2 2 2 × + × = 431 ss = F S-1 ( CSL ) × σ L = F S-1 (0.95) × 431 = 709 (where, F S-1 (0.95) = NORMSINV (0.95)) ) ( )] ( 1 [ σ σ σ L S L L S ss f ss F ss ESC +-- = ESC = – ss [1 – NORMDIST ( ss / σ L , 0, 1, 1)] + σ L NORMDIST ( ss / σ L , 0, 1, 0) = 9 Fill rate (fr) = 1- (ESC/Q) = 1- (9/1000) = 0.991 2 Standard deviation of lead time Required safety inventory 1.50 709 1.00 539 0.50 405 0.00 349 Excel Worksheet 11-5 illustrates these computations 6. Following are the evaluations for the Khaki pants: Disaggregated Option : D L = LD = (4)(800) = 3200 σ L = σ D L = ) 100 ( 4 = 200 Coefficient of variation = μ σ / = 100/800 = 0.13 ss per store = F S-1 ( CSL ) × σ L = F S-1 (0.95) × 200 = 329 (where, F S-1 (0.95) = NORMSINV (0.95)) Total safety inventory = (329)(900) = 296,074 Total value of safety inventory = (296,074)(30) = $8,882,210 Total annual safety inventory holding cost = (8,882,210)(0.25) = $2,220,552 Holding cost per unit sold = 2220552/(800)(900) = $3.08 Aggregated Option : kD D C = = (900)(800) = 720000 σ σ k C D = = ) 100 ( 900 = 3000 D L = LD C = (4)(800)(900) = 2,880,000 σ L = C D L σ = ) 3000 ( 4 = 6000 ss = F S-1 ( CSL ) × σ L = F S-1 (0.95) ×...
View Full Document

This note was uploaded on 09/17/2009 for the course INDUSTRIAL 0906547 taught by Professor Khaldontahboub during the Three '09 term at ADFA.

Page1 / 15

Chapter 11 - Chapter 11 Managing Economies of Scale in the...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online