Problem B (10 points) The Luxury Luggage Company predicts that 5,280 cases of zi

Question

Problem B (10 points) The Luxury Luggage Company predicts that 5,280 cases of zippers will be used during the year to satisfy production needs. The following additional information is known: On average, 20 cases of zippers are used per work day. Production is very consistent. There are no significant deviations in demand. zippers. However, lead time can vary. The standard deviation of lead time is 1 day The owner of the company wants a high level of customer service (95.25%) .On average, it takes 5 work days from the date an order is placed with a vendor to receipt of the .On average, the zippers cost $20 per case. The plant manager has been asked to control the amount of material on hand (not too little, not too much). Given the information above and using the techniques learned in class: How many cases of zippers should Luxury Luggage maintain as safety stock? Atwhat point (what inventory quantity level) should the plant manager place an order for zippers? a. b. SHOW YOUR WORK!

Explanation / Answer

1. Safety Stock = (Maximum daily usage - Average daily usage )× Lead time.

= (20-14.4)×6 .

=5.6×6 = 34 units.

Note:- Average daily usage = 5,280÷365.

Lead time is taken as 6 days by adding standard deviation in lead time of 1 day which will be 5+1=6days.

2.Re order level = Safety stock + Average daily usage × Lead time.

= 34+14.4×6

= 121 units.

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