1bROP as PDF

# 1bROP as PDF - HOMEWORK 1 The lead time demand for...

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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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SOLUTION 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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1bROP as PDF - HOMEWORK 1 The lead time demand for...

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