IEOR150F10_hw03_sol

Time years 005 inventory level units 100 the order

This preview shows pages 2–3. Sign up to view the full content.

· · · · · · · · · · · · · · · · · · · · · · · · · · Time (years) 0.05 Inventory level (units) 100 The order quantity of the warehouse should be twice larger than Q R , i.e., Q 0 W = Q W 200 units . Another way to see this is Q W = λT . As long as the order cycle time of the warehouse does not change, its order quantity cannot change. The inventory level of the warehouse is the thick line depicted below. Note that it is never 200: Whenever the warehouse get replenished, it ships half of it receives to the retail store immediately. - 6 Time (years) 0.05 Inventory level (units) 100 (d) The annual setup cost of the warehouse is still K W T = \$500. The annual setup cost of the retail store becomes K R T 0 R = \$200. The average inventory level of the warehouse throughout a year is 100 2 = 50. This implies that the annual holding cost of the warehouse is 50 h W = \$50. The annual holding cost of the retail store is h R Q 0 R 2 = \$500. The annual total cost of the system is thus \$1250 . The policy with k = 2 is better. Though it incurs a higher setup cost of the retail store due to the more frequent ordering, it reduces the holding cost at the same time. Since the holding cost at the retail store is quite expensive, this reduces the total cost. 2

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
3. (a) The basic EOQ formulas T * = r 2 K λh and G * = 2 Kλh gives us T * 1 = 0 . 447 year , T * 2 = 0 . 037 year , G * 1 = \$894 . 43 , and G * 2 = \$1095 . 45 . (b) Since log 2 ˆ T 1 T ! = 2 . 16 and log 2 ˆ T 2 T ! = - 1 . 45 , we know the candidates for k 1 are k F 1 = 2 and k C 1 = 3 and the candidates for k 2 are k F 2 = - 2 and k C 2 = - 1. With each of these four values, we may find the corresponding order cycle time and
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern