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HW 2 R F11 - whole year 2(Continuous review system with...

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1 Homework Assignment #2 DSC 335 Due date : November 17 th , Thursday. Policy : You may work in a group of up to five students. Your homework group need not be the same as your course activity group. Each homework group hands in one copy. Problems from the textbook. Chapter 14, pages 439-441 Problem 5 a, b, c, d and e. Problem 7 all questions. Additional problems: 1. (EOQ model) You (the buyer) manage the inventory of an item. Your forecast for the next year’s demand is 1,000 units for the whole year. You pay the supplier $20 for each unit. It costs $5 ordering cost to place an order, and the annual inventory holding cost for a unit is 20% of its purchase cost. 1) Under the current policy, your order size is Q=100. What are the total (sum of) ordering (setup) costs and inventory holding costs over the next year? 2) If you use EOQ model to manage inventory. What is the EOQ? What is the corresponding total cost (including ordering and inventory holding costs) for the
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Unformatted text preview: whole year? 2. (Continuous review system, with safety stock) A factory produces a part to supply its customers. The factory faces a random demand from its customers. The weekly demand has a normal distribution, with the expectation (mean) of 300 units and the standard deviation of 90 units. The production lead time is 4 weeks (that’s it takes 4 weeks to finish a production run). The production manager uses the continuous review system to plan production. 1) What is the safety stock necessary to achieve the service level of 98%? What is the corresponding reorder point? 2) Suppose the production manager must reduce the safety stock in the above question by 50%, by lowering the service level (while all other model parameters are unchanged). What will be the new service level (i.e., the probability of no stockout) that attains the reduced safety stock?...
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