15 Points Periodic review inventory system, re-order point question. This is wha
ID: 370586 • Letter: 1
Question
15 Points Periodic review inventory system, re-order point question.
This is what happens at your firm, that operates 7 days/week, 52 weeks/year.
You check widget inventory every Friday.
You order more widgets right after inventory-they always arrive on the following Wednesday.
You noticed that every order if added to the Friday on-hand inventory totals 3,418 widgets.
Your firm policy permits accepting more than a 1/100 chance of stocking out of widgets.
In the last 26 weeks, records show that 32,760 widgets have been used.
What is the average widget demand over the last year, in widgets per week?
How long is the re-order period?
How long is the lead time?
What is the standard deviation in demand over the Re-order and lead time period?
The firm decides that too much is being spent on inventory, so they have eased the 1/100 chance limit to 1/20. What’s the revised re-stocking level going to be now? (text page 293)
Explanation / Answer
Ans 1) Average demand = 32,760 / 26 = 1260 widgets per week
Ans 2) Re-order period = 7 days since widgets are re-ordered just after checking on every Friday.
Ans 3) Lead Time : Saturday to the next Wednesday = 6 days
Since text book name is not mentioned in question, page 293 cannot be referred.
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