Lisa Fleet, the manager of an automotive repair shop, hopes to achieve a better

Question

Lisa Fleet, the manager of an automotive repair shop, hopes to achieve a better allocation of inventory control efforts through an examination of historical usage for various parts. command a Lisa is concerned about being able to provide superior service in order to competitive advantage over other local repair shops. That is one reason Lisa keeps her shop open seven days a week, 52 weeks per year. Currently, her shop inventories over 1,000 items. Although a priority of Lisa's is providing superior customer service, there are also a large number of local competitors so cost control is equally important. By keeping an inventory of some items (e.g., wiper refills), she is better able to get customers back on the road more quickly. Furthermore, Lisa uses a bar coding system that provides her a continuous count of the items she keeps inventory. Lisa has collected the following system data: Lisa's parts supplier guarantees her next day delivery, seven days a week, for all Lisa estimates her annual holding cost to be about 5 percent of the item purchase .Lisa estimates the activities required to place an order cost about $25. Below you will find historical demand figures of 8 different items. In addition, the average service time and service time standard deviation it takes Lisa's shop to service a vehicle requiring the item is noted. Average Standard DeviationItem Shop Service Time Average Shop Service Time 3 days 4 days 10 minutes 2 hours 2 days Purchase Price Std Deviation 1 day 1 hour I day negligible Item Weekly Demand of Weekly Demand Water pump Starter motor 4 units 28 units 79 units 183 units 25 units 8 units 5 units 91 units 1 unit 5 units 12 units 23 units 6 units 225 Spark plug 12 Generator Alternator Wiper refill 1 unit 4 units 14 5 minutes In order to implement her desire to utilize a continuous review inventory system, Lisa needs to make a variety of modeling assumptions for each item in order to determine the appropriate order quantity (0). Identify the relevant modeling assumptions in the following list for Lisa by checking the associated box. 1. desired service level one product known and constant cost information target (maximum) inventory value no stock outs allowed lead time parameters (avg ando) known and constant order lead time known and constant demand rate number of items in her system standard deviation of lead time demand O storage space requirements no quantity discounts permitted desired length of review period instantaneous resupply competition's cost information order interval to use

Explanation / Answer

A> In order to determine the Q( Apprpriate Order Quantity) the following formulae is used

So for modelling the following factors need to be taken into consideration

1> Cost Information

2> No stock-outs

B>

For Determining the Q & R the relevant informantion required are

1> Desired service level % which is given as 97%

2> holding cost

3> Order Cost

4> Item Purchase price as Holding cost is % of the the item purchase price

5> Historical Demand

6> Standard Deviation of the weekly demand

7> Shop Service time average

8> Shop Service time St.dev

9> Lead time

C> Considering the fact that Lisa wanted to maintain a superior service level so as to gain competetive advantage so the the best system to avoid stock out situation is only " continous Inventory Review System"

D>

Q is as compute in the formulae above

So replacing the value of of D = 4732, S= $25 And H= $36.4

we Q= 80 units

R= Re-order point = Demand Rate per day * Lead time= (91/7*1)= 13

End of answer

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