cl18_Inventory_Management_II

Fixed time systems vs fixed systems which system

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Unformatted text preview: and hand is ordered Fixed Fixed-Order vs. Fixed-Time Systems vs. Fixed Systems Which system would Home Depot to use for… Nails Washing Machines 9 Learning Objectives Learning Objectives EOQ Model with Positive Lead Time • Reorder Point • Example Fixed-Order Quantity Model • Safety Stock • Example with Discrete Demand • Example with Normal Demand 10 Stephen Shum Spring 2009 Example: Example: Sweater (Random Demand + Positive Lead Time) Ti Back to Jenny’s fashion store… to Jenny fashion store… – Suppose demand is random with mean 100 per week and standard deviation 20 – Orders arrive 0.5 week after ordering – Costs and other conditions unchanged 1) When to Reorder? 2) How Much to Order? How Much to Order? 11 Stephen Shum Spring 2009 ROP When Demand is Uncertain ROP When Demand is Uncertain Average demand rate d. Is ROP = dL good enough? d L Stockout! slope d slope d Time 0 Place order Receive order L Place order Receive order L Safety Stock Safety Stock Inventory ROP = dL + SS SS Increase ROP by SS ROP d L SS Time 0 L L Safety Stock Safety Stock When demand has unpredictable variability, safety When stock is held to cushion against uncertainties ROP = Average demand during lead tim...
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