You are in charge of inventory control of a highly successful product retailed by your firm. Weekly demand for this item varies, with an average of 350 units and a standard deviation of 15 units. It is purchased from a wholesaler at a cost of $25.00 per unit. The supply lead time is 7 weeks. Placing an order costs $55.00, and the inventory carrying rate per year is 15 percent of the item's cost. Your firm operates 6 days per week, 50 weeks per year. Refer to the standard normal table The table below shows the total area under the normal curve for a point that is Z standard deviations to the right of the mean. Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359 0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5754 0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141 0.3 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.6480 0.6517 0.4 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879 0.5 0.6915 0.6950 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.7190 0.7224 0.6 0.7258 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7518 0.7549 0.7 0.7580 0.7612 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852 0.8 0.7881 0.7910 0.7939 0.7967 0.7996 0.8023 0.8051 0.8079 0.8106 0.8133 0.9 0.8159 0.8186 0.8212 0.8238 0.8264 0.8289 0.8315 0.8340 0.8365 0.8389 1.0 0.8413 0.8438 0.8461 0.8485 0.8508 0.8531 0.8554 0.8577 0.8599 0.8621 1.1 0.8643 0.8665 0.8686 0.8708 0.8729 0.8749 0.8770 0.8790 0.8810 0.8830 1.2 0.8849 0.8869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015 1.3 0.9032 0.9049 0.9066 0.9082 0.9099 0.9115 0.9131 0.9147 0.9162 0.9177 1.4 0.9192 0.9207 0.9222 0.9236 0.9251 0.9265 0.9279 0.9292 0.9306 0.9319 1.5 0.9332 0.9345 0.9357 0.9370 0.9382 0.9394 0.9406 0.9418 0.9430 0.9441 1.6 0.9452 0.9463 0.9474 0.9485 0.9495 0.9505 0.9515 0.9525 0.9535 0.9545 1.7 0.9554 0.9564 0.9573 0.9582 0.9591 0.9599 0.9608 0.9616 0.9625 0.9633 1.8 0.9641 0.9649 0.9656 0.9664 0.9671 0.9678 0.9686 0.9693 0.9700 0.9706 1.9 0.9713 0.9719 0.9726 0.9732 0.9738 0.9744 0.9750 0.9756 0.9762 0.9767 2.0 0.9773 0.9778 0.9783 0.9788 0.9793 0.9798 0.9803 0.9808 0.9812 0.9817 2.1 0.9821 0.9826 0.9830 0.9834 0.9838 0.9842 0.9846 0.9850 0.9854 0.9857 2.2 0.9861 0.9865 0.9868 0.9871 0.9875 0.9878 0.9881 0.9884 0.9887 0.9890 2.3 0.9893 0.9896 0.9898 0.9901 0.9904 0.9906 0.9909 0.9911 0.9913 0.9916 2.4 0.9918 0.9920 0.9922 0.9925 0.9927 0.9929 0.9931 0.9932 0.9934 0.9936 2.5 0.9938 0.9940 0.9941 0.9943 0.9945 0.9946 0.9948 0.9949 0.9951 0.9952 2.6 0.9953 0.9955 0.9956 0.9957 0.9959 0.9960 0.9961 0.9962 0.9963 0.9964 2.7 0.9965 0.9966 0.9967 0.9968 0.9969 0.9970 0.9971 0.9972 0.9973 0.9974 2.8 0.9974 0.9975 0.9976 0.9977 0.9977 0.9978 0.9979 0.9980 0.9980 0.9981 2.9 0.9981 0.9982 0.9983 0.9983 0.9984 0.9984 0.9985 0.9985 0.9986 0.9986 3.0 0.9987 0.9987 0.9987 0.9988 0.9988 0.9989 0.9989 0.9989 0.9990 0.9990 3.1 0.9990 0.9991 0.9991 0.9991 0.9992 0.9992 0.9992 0.9992 0.9993 0.9993 3.2 0.9993 0.9993 0.9994 0.9994 0.9994 0.9994 0.9994 0.9995 0.9995 0.9995 3.3 0.9995 0.9995 0.9995 0.9995 0.9996 0.9996 0.9996 0.9996 0.9996 0.9997 a. What is the optimal ordering quantity for this item? enter your response here units. (Enter your response rounded to the nearest whole number.) Part 3 b. How many units of the item should be maintained as safety stock for 92 percent protection against stockouts during an order cycle? enter your response here units. (Enter your response rounded to the nearest whole number.) Part 4 c. If supply lead time can be reduced to 1 weeks, what is the percent reduction in the number of units maintained as safety stock for the same 92 percent stockout protection? enter your response here%. (Enter your response rounded to two decimal places.) Part 5 d. If through appropriate sales promotions, the demand variability is reduced so that the standard deviation of weekly demand is 10 units instead of 15, what is the percent reduction (compared to that in part (b)) in the number of units maintained as safety stock for the same 92 percent stockout protection? enter your response here%. (Enter your response rounded to two decimal places.)
You are in charge of inventory control of a highly successful product retailed by your firm. Weekly demand for this item varies, with an average of 350 units and a standard deviation of 15 units. It is purchased from a wholesaler at a cost of $25.00 per unit. The supply lead time is 7 weeks. Placing an order costs $55.00, and the inventory carrying rate per year is 15 percent of the item's cost. Your firm operates 6 days per week, 50 weeks per year. Refer to the standard normal table The table below shows the total area under the normal curve for a point that is Z standard deviations to the right of the mean. Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359 0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5754 0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141 0.3 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.6480 0.6517 0.4 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879 0.5 0.6915 0.6950 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.7190 0.7224 0.6 0.7258 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7518 0.7549 0.7 0.7580 0.7612 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852 0.8 0.7881 0.7910 0.7939 0.7967 0.7996 0.8023 0.8051 0.8079 0.8106 0.8133 0.9 0.8159 0.8186 0.8212 0.8238 0.8264 0.8289 0.8315 0.8340 0.8365 0.8389 1.0 0.8413 0.8438 0.8461 0.8485 0.8508 0.8531 0.8554 0.8577 0.8599 0.8621 1.1 0.8643 0.8665 0.8686 0.8708 0.8729 0.8749 0.8770 0.8790 0.8810 0.8830 1.2 0.8849 0.8869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015 1.3 0.9032 0.9049 0.9066 0.9082 0.9099 0.9115 0.9131 0.9147 0.9162 0.9177 1.4 0.9192 0.9207 0.9222 0.9236 0.9251 0.9265 0.9279 0.9292 0.9306 0.9319 1.5 0.9332 0.9345 0.9357 0.9370 0.9382 0.9394 0.9406 0.9418 0.9430 0.9441 1.6 0.9452 0.9463 0.9474 0.9485 0.9495 0.9505 0.9515 0.9525 0.9535 0.9545 1.7 0.9554 0.9564 0.9573 0.9582 0.9591 0.9599 0.9608 0.9616 0.9625 0.9633 1.8 0.9641 0.9649 0.9656 0.9664 0.9671 0.9678 0.9686 0.9693 0.9700 0.9706 1.9 0.9713 0.9719 0.9726 0.9732 0.9738 0.9744 0.9750 0.9756 0.9762 0.9767 2.0 0.9773 0.9778 0.9783 0.9788 0.9793 0.9798 0.9803 0.9808 0.9812 0.9817 2.1 0.9821 0.9826 0.9830 0.9834 0.9838 0.9842 0.9846 0.9850 0.9854 0.9857 2.2 0.9861 0.9865 0.9868 0.9871 0.9875 0.9878 0.9881 0.9884 0.9887 0.9890 2.3 0.9893 0.9896 0.9898 0.9901 0.9904 0.9906 0.9909 0.9911 0.9913 0.9916 2.4 0.9918 0.9920 0.9922 0.9925 0.9927 0.9929 0.9931 0.9932 0.9934 0.9936 2.5 0.9938 0.9940 0.9941 0.9943 0.9945 0.9946 0.9948 0.9949 0.9951 0.9952 2.6 0.9953 0.9955 0.9956 0.9957 0.9959 0.9960 0.9961 0.9962 0.9963 0.9964 2.7 0.9965 0.9966 0.9967 0.9968 0.9969 0.9970 0.9971 0.9972 0.9973 0.9974 2.8 0.9974 0.9975 0.9976 0.9977 0.9977 0.9978 0.9979 0.9980 0.9980 0.9981 2.9 0.9981 0.9982 0.9983 0.9983 0.9984 0.9984 0.9985 0.9985 0.9986 0.9986 3.0 0.9987 0.9987 0.9987 0.9988 0.9988 0.9989 0.9989 0.9989 0.9990 0.9990 3.1 0.9990 0.9991 0.9991 0.9991 0.9992 0.9992 0.9992 0.9992 0.9993 0.9993 3.2 0.9993 0.9993 0.9994 0.9994 0.9994 0.9994 0.9994 0.9995 0.9995 0.9995 3.3 0.9995 0.9995 0.9995 0.9995 0.9996 0.9996 0.9996 0.9996 0.9996 0.9997 a. What is the optimal ordering quantity for this item? enter your response here units. (Enter your response rounded to the nearest whole number.) Part 3 b. How many units of the item should be maintained as safety stock for 92 percent protection against stockouts during an order cycle? enter your response here units. (Enter your response rounded to the nearest whole number.) Part 4 c. If supply lead time can be reduced to 1 weeks, what is the percent reduction in the number of units maintained as safety stock for the same 92 percent stockout protection? enter your response here%. (Enter your response rounded to two decimal places.) Part 5 d. If through appropriate sales promotions, the demand variability is reduced so that the standard deviation of weekly demand is 10 units instead of 15, what is the percent reduction (compared to that in part (b)) in the number of units maintained as safety stock for the same 92 percent stockout protection? enter your response here%. (Enter your response rounded to two decimal places.)
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter16: Lean Supply Chain Management
Section: Chapter Questions
Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...
Related questions
Question
You are in charge of inventory control of a highly successful product retailed by your firm. Weekly demand for this item varies, with an average of 350 units and a standard deviation of 15 units. It is purchased from a wholesaler at a cost of $25.00 per unit. The supply lead time is 7 weeks. Placing an order costs $55.00, and the inventory carrying rate per year is 15 percent of the item's cost. Your firm operates 6 days per week, 50 weeks per year. Refer to the standard normal table
The table below shows the total area under the normal curve for a point that is Z standard deviations to the right of the mean.
|
Z
|
0.00
|
0.01
|
0.02
|
0.03
|
0.04
|
0.05
|
0.06
|
0.07
|
0.08
|
0.09
|
|
0.0
|
0.5000
|
0.5040
|
0.5080
|
0.5120
|
0.5160
|
0.5199
|
0.5239
|
0.5279
|
0.5319
|
0.5359
|
|
0.1
|
0.5398
|
0.5438
|
0.5478
|
0.5517
|
0.5557
|
0.5596
|
0.5636
|
0.5675
|
0.5714
|
0.5754
|
|
0.2
|
0.5793
|
0.5832
|
0.5871
|
0.5910
|
0.5948
|
0.5987
|
0.6026
|
0.6064
|
0.6103
|
0.6141
|
|
0.3
|
0.6179
|
0.6217
|
0.6255
|
0.6293
|
0.6331
|
0.6368
|
0.6406
|
0.6443
|
0.6480
|
0.6517
|
|
0.4
|
0.6554
|
0.6591
|
0.6628
|
0.6664
|
0.6700
|
0.6736
|
0.6772
|
0.6808
|
0.6844
|
0.6879
|
|
0.5
|
0.6915
|
0.6950
|
0.6985
|
0.7019
|
0.7054
|
0.7088
|
0.7123
|
0.7157
|
0.7190
|
0.7224
|
|
0.6
|
0.7258
|
0.7291
|
0.7324
|
0.7357
|
0.7389
|
0.7422
|
0.7454
|
0.7486
|
0.7518
|
0.7549
|
|
0.7
|
0.7580
|
0.7612
|
0.7642
|
0.7673
|
0.7704
|
0.7734
|
0.7764
|
0.7794
|
0.7823
|
0.7852
|
|
0.8
|
0.7881
|
0.7910
|
0.7939
|
0.7967
|
0.7996
|
0.8023
|
0.8051
|
0.8079
|
0.8106
|
0.8133
|
|
0.9
|
0.8159
|
0.8186
|
0.8212
|
0.8238
|
0.8264
|
0.8289
|
0.8315
|
0.8340
|
0.8365
|
0.8389
|
|
1.0
|
0.8413
|
0.8438
|
0.8461
|
0.8485
|
0.8508
|
0.8531
|
0.8554
|
0.8577
|
0.8599
|
0.8621
|
|
1.1
|
0.8643
|
0.8665
|
0.8686
|
0.8708
|
0.8729
|
0.8749
|
0.8770
|
0.8790
|
0.8810
|
0.8830
|
|
1.2
|
0.8849
|
0.8869
|
0.8888
|
0.8907
|
0.8925
|
0.8944
|
0.8962
|
0.8980
|
0.8997
|
0.9015
|
|
1.3
|
0.9032
|
0.9049
|
0.9066
|
0.9082
|
0.9099
|
0.9115
|
0.9131
|
0.9147
|
0.9162
|
0.9177
|
|
1.4
|
0.9192
|
0.9207
|
0.9222
|
0.9236
|
0.9251
|
0.9265
|
0.9279
|
0.9292
|
0.9306
|
0.9319
|
|
1.5
|
0.9332
|
0.9345
|
0.9357
|
0.9370
|
0.9382
|
0.9394
|
0.9406
|
0.9418
|
0.9430
|
0.9441
|
|
1.6
|
0.9452
|
0.9463
|
0.9474
|
0.9485
|
0.9495
|
0.9505
|
0.9515
|
0.9525
|
0.9535
|
0.9545
|
|
1.7
|
0.9554
|
0.9564
|
0.9573
|
0.9582
|
0.9591
|
0.9599
|
0.9608
|
0.9616
|
0.9625
|
0.9633
|
|
1.8
|
0.9641
|
0.9649
|
0.9656
|
0.9664
|
0.9671
|
0.9678
|
0.9686
|
0.9693
|
0.9700
|
0.9706
|
|
1.9
|
0.9713
|
0.9719
|
0.9726
|
0.9732
|
0.9738
|
0.9744
|
0.9750
|
0.9756
|
0.9762
|
0.9767
|
|
2.0
|
0.9773
|
0.9778
|
0.9783
|
0.9788
|
0.9793
|
0.9798
|
0.9803
|
0.9808
|
0.9812
|
0.9817
|
|
2.1
|
0.9821
|
0.9826
|
0.9830
|
0.9834
|
0.9838
|
0.9842
|
0.9846
|
0.9850
|
0.9854
|
0.9857
|
|
2.2
|
0.9861
|
0.9865
|
0.9868
|
0.9871
|
0.9875
|
0.9878
|
0.9881
|
0.9884
|
0.9887
|
0.9890
|
|
2.3
|
0.9893
|
0.9896
|
0.9898
|
0.9901
|
0.9904
|
0.9906
|
0.9909
|
0.9911
|
0.9913
|
0.9916
|
|
2.4
|
0.9918
|
0.9920
|
0.9922
|
0.9925
|
0.9927
|
0.9929
|
0.9931
|
0.9932
|
0.9934
|
0.9936
|
|
2.5
|
0.9938
|
0.9940
|
0.9941
|
0.9943
|
0.9945
|
0.9946
|
0.9948
|
0.9949
|
0.9951
|
0.9952
|
|
2.6
|
0.9953
|
0.9955
|
0.9956
|
0.9957
|
0.9959
|
0.9960
|
0.9961
|
0.9962
|
0.9963
|
0.9964
|
|
2.7
|
0.9965
|
0.9966
|
0.9967
|
0.9968
|
0.9969
|
0.9970
|
0.9971
|
0.9972
|
0.9973
|
0.9974
|
|
2.8
|
0.9974
|
0.9975
|
0.9976
|
0.9977
|
0.9977
|
0.9978
|
0.9979
|
0.9980
|
0.9980
|
0.9981
|
|
2.9
|
0.9981
|
0.9982
|
0.9983
|
0.9983
|
0.9984
|
0.9984
|
0.9985
|
0.9985
|
0.9986
|
0.9986
|
|
3.0
|
0.9987
|
0.9987
|
0.9987
|
0.9988
|
0.9988
|
0.9989
|
0.9989
|
0.9989
|
0.9990
|
0.9990
|
|
3.1
|
0.9990
|
0.9991
|
0.9991
|
0.9991
|
0.9992
|
0.9992
|
0.9992
|
0.9992
|
0.9993
|
0.9993
|
|
3.2
|
0.9993
|
0.9993
|
0.9994
|
0.9994
|
0.9994
|
0.9994
|
0.9994
|
0.9995
|
0.9995
|
0.9995
|
|
3.3
|
0.9995
|
0.9995
|
0.9995
|
0.9995
|
0.9996
|
0.9996
|
0.9996
|
0.9996
|
0.9996
|
0.9997
|
a. What is the optimal ordering quantity for this item?
enter your response here
units. (Enter your response rounded to the nearest whole number.)Part 3
b. How many units of the item should be maintained as safety stock for
92
percent protection against stockouts during an order cycle?
enter your response here
units. (Enter your response rounded to the nearest whole number.)Part 4
c. If supply lead time can be reduced to
1
weeks, what is the percent reduction in the number of units maintained as safety stock for the same
92
percent stockout protection?
enter your response here%.
(Enter your response rounded to two decimal places.)Part 5
d. If through appropriate sales promotions, the demand variability is reduced so that the standard deviation of weekly demand is
10
units instead of
15,
what is the percent reduction (compared to that in part (b)) in the number of units maintained as safety stock for the same
92
percent stockout protection?
enter your response here%.
(Enter your response rounded to two decimal places.).
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