HOMEWORK
1.
The lead time demand for microwave ovens is found to have the following
probability distribution:
Demand
Probability
7
0.03
8
0.07
9
0.10
10
0.70
11
0.06
12
0.04
a.
What should be the R.O.P. so that the probability of a stock out is 5%.
b.
If the R.O.P. is set at 10 what is the probability of a stock out?
c.
For a 95% service level, what should the R.O.P. be? What is the safety stock?
d.
If the service level is changed to 85%, what is the reorder point?
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View Full DocumentSOLUTION
Demand
Probability
P(Dem > D)
7
0.03
0.97
8
0.07
0.90
9
0.10
0.80
10
0.70
0.10
11
0.06
0.04
12
0.04
0.00
a.
If
P(Stk Out = 0.05), then the ROP should be 11, since at ROP of 11, the
P(Stk Out) = 0.04 which is better than 0.05.
b.
If the ROP is set at 10, the P(Stk Out) = 0.10
c.
If the desired service level is is 95%, then the P(Stk Out) = 1  0.95 = 0.05
And for P(Stk Out) = 0.05, the ROP must be set at 11.
Safety Stock = ROP  (Expected Demand during lead time)
And the Expected Demand during lead time = (7)(0.03) + (8)(0.07) + (9)(0.10)
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 Winter '10
 Verma
 service level

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