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cl18_Inventory_Management_II

# Orders arrive after 05 week jenny wants to maintain

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Unformatted text preview: ter 0.5 week. Jenny wants to maintain Jenny wants to maintain a service service level of 85%. When should Jenny reorder? reorder? 23 Stephen Shum Spring 2009 24 24 Example: Microwave Ovens Example: Microwave Ovens The lead-time demand for microwave ovens is found to be di distributed according to the following probability th distribution: Demand 6 7 8 9 10 11 12 13 14 Probability 0.02 0.03 0.1 0.24 0.4 0.15 0.03 0.02 0.01 Probability 0.4 0.4 0.3 0.24 0.2 0.15 0.1 0.1 0.03 0.02 0.02 0.03 0.01 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Demand Using fixed-order quantity model, and a 95% service level, what should the reorder point be? What is the safety stock? ROP for Discrete Demand ROP for Discrete Demand Probability 0.4 0.4 0.3 0.24 0.2 0.15 0.1 0.1 0.03 0.02 0.02 0.03 0.01 0 0 1 2 3 4 5 6 7 8 9 10 11 Demand 79% 94% 26 97% 12 13 14 15 Summary Summary of Fixed-Order Quantity FixedModel Optimal Order Quantity: Optimal Order Quantity: Q, use EOQ use EOQ Reorder Point = Average demand during lead time + Safety stock: ROP = d L + SS Safety Stock is determined based on – Service level – Demand variability – Lead time Average inventory = Q / 2 + SS (assume cash on delivery) Exercise: Fixed-Order Model Exercise: Fixed Model The annual demand for a product is 15,600 units. The weekly demand is 300 units with a standard deviation of 90 units. The cost to place an order is \$31.20, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is \$0.10 per unit. Find Find the optimal ordering quantity and the reorder point necessary to provide a 98 percent service level. (Fact: NORMSINV(0.98) = 2.05) Suppose the production manager is asked to reduce the safety stock of this item by 50 percent. If she does so, what will the new service level be? hi 50 If (Hint: (Hint: you can write the answer using the NORMSDIST function) 28 Next Class Next Class Inventory Management III – Fixed-Time Period Model Time Period Model 29 Man Yu - Spring 2009...
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