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cl18_Inventory_Management_II

One day demand lead time l 2 two day demand d d l 10 d

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Unformatted text preview: Compute L ? One-day demand Lead time L = 2 Two-day demand d d L 10 d = 3 20 L > 3 ? L = 6 ? L = ___ Daily demand variability d Lead time L days L = L Effect Effect of Service Level on Safety Stock SS =__________, where z = Safety Stock NORMSINV(service NORMSINV(service level) 0 .5 1 Service Level How How to Compute ROP for a Service Level? Case 2: Discrete Demand Di Probability 0.4 ROP = the smallest number that service level is met Lead time demand ti 0.3 0.2 0.1 0 0 1 2 3 4 dL 5 6 7 8 9 10 11 12 13 14 15 SS Compared with normal demand: 0 dL SS Comparison: Comparison: Normal and Discrete Demand With normal demand normal demand – SS = zL = z L d , where z = NORMSINV(service where level) – ROP = dL + SS With discrete demand discrete demand – Find ROP directly based on the distribution of the lead time demand the lead time demand – SS = ROP - dL Example: Sweaters Example: Sweaters Demand: random, (mean = 100 per week, standard deviation = 20 ) Fixed cost of $200 every time it places an order Marginal cost of a sweater is $400 Cost of capital is approximately 25% per week. Orders arrive af...
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