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Unformatted text preview: Inventory level in real life-time between orders depends on demand Reorder point = d x L + SS Ex. RP = D x L + z x L L=6 Daily~N(60, 7) L = D x L + z + Continuous system -Good: (1) Keeps constant count of inventory and (2) fixed order quantity.-Bad: (1) Higher record keeping cost; (2) Periodic inventory counting is still required; (3) Time of delivery is random. (ROP,Q) policy-Order when the inventory reaches the ROP-The order size is always Q Safety Stock: Stock that is held in excess of expected demand due to variable demand rate and/or lead time. An expense of doing business. Necessary to ensure good customer service. Safety stock is determined by demand variability and target service level. Daily demand for a certain product is normally distributed with a mean of 60 and a standard deviation of 7. The source of supply is reliable and maintains a constant lead time of six days. The cost of placing the order is $10 and annual holding costs are $0.50 per unit. There are no stockout costs, and unfilled orders are filled as soon as and annual holding costs are $0....
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This note was uploaded on 02/15/2011 for the course BUAD 311 at USC.