# HW 6 - HW 6 1 Scenario MassPC Inc produces a 4-week supply...

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HW 6 1. Scenario: MassPC Inc. produces a 4-week supply of its PCPal model when stock on hand drops to 500 units. (It takes 1 week to produce a batch.) Factory orders average 400 units per week, and standard deviation of forecast errors is estimated at 125 units per week. (see Exercise 7.1, p. 195) a) What level of customer service is MassPC providing in terms of stock availability? b) MassPC wants to improve customer service to 80%, how will this improvement affect the company's reorder policy and its annual cost? c) MassPC wants to improve customer service to 90%, how will this improvement affect the company's reorder policy and its annual cost? a) I safety =ROP-LTD =500-400=100 z=I safety/ σ ltd =100/ 125 =0.8 SL=Prob (Z≤0.8) = 0.7881 CR Q H Q R S + + 2 * = TC b) SL=Prob (Z≤ z) =0.8 z=0.8416 I safety=0.8416*125=105.2 ROP= I safety+LTD=400+105.2= 505.2 CR Q H Q R S + + 2 * = TC TC=S*400*52/500+H*500/2+CR TC’= S*400*52/505.2+H*505.2/2+CR TC-TC’=0.43S-2.6H=0 Then S=6.05H If the fixed cost S is more than 6.05H (inventory cost) , then the annual cost will decrease.

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HW 6 - HW 6 1 Scenario MassPC Inc produces a 4-week supply...

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