Problem 4 (10%) The Discrete Corporation orders 5 units of an item every day. Da

Question

Problem 4 (10%) The Discrete Corporation orders 5 units of an item every day. Daily demand of this iem averages 5 units and is diaribhured s follows: Demand: 23 456 Probability: 0.01 0.04 0.1 0.2 0.3 0.2 0.1 0.04 0.01 a. If management sets the reorder point at 7 units, what is the service level (SL)? b. Assuming 200 workdays (i.e., annual demand-1,000), how many units of annual demand can't be supplied out of inventory? c. What is the average number of stockouts (stockout units) per order cycle? d. What is total number of stockout units in a year?

Explanation / Answer

a) Probability of daily demand being more than 7 = 0.04+0.01 = 0.05 (when demand is 8 or 9)

Therefore, service level = 1 - 0.05 = 0.95

b) With reorder point at 7, shortage occurs when daily demand is more than 7. So, expected shortage per day = (8-7)*.04 + (9-7)*.01 = 0.06

Average number of stockout units per order cycle = 0.06

Units of annual demand that can't be supplied = 0.06*200 = 12 units

c) as calculated in part b, Average number of stockout units per order cycle = 0.06

d) This is same as part b, Total number of stockouts units in a year = 0.06*200 = 12 units

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.