Dunstreet\'s Department Store would like to develop an inventory ordering policy
ID: 406897 • Letter: D
Question
Dunstreet's Department Store would like to develop an inventory ordering policy of a 95 percent probability of not stocking out. To illustrate your recommended procedure, use as an example the ordering policy for white percale sheets.
Demand for white percale sheets is 4,600 per year. The store is open 365 days per year. Every four weeks (28 days) inventory is counted and a new order is placed. It takes 8 days for the sheets to be delivered. Standard deviation of demand for the sheets is seven per day. There are currently 160 sheets on hand.
How many sheets should you order?
Dunstreet's Department Store would like to develop an inventory ordering policy of a 95 percent probability of not stocking out. To illustrate your recommended procedure, use as an example the ordering policy for white percale sheets.
Demand for white percale sheets is 4,600 per year. The store is open 365 days per year. Every four weeks (28 days) inventory is counted and a new order is placed. It takes 8 days for the sheets to be delivered. Standard deviation of demand for the sheets is seven per day. There are currently 160 sheets on hand.
?How many sheets should you order?
Sarah's Muffler Shop has one standard muffler that fits a large variety of cars. Sarah wishes to establish a reorder point system to manage inventory of this standard muffler. 5,600 mufflers $40 per order Annual demand Standard deviation of daily demand tem cost Annual holding cost Ordering cost service probability Lead time Working days 5 mufflers per working day 90% $50 per muffler 3 working days 300 per year 35% of item value Use the above information to determine the best order size and the reorder point. (Round your answers to the nearest whole number.) Best order size mufflers Reorder point mufflersExplanation / Answer
Given Information :
Ordering policy for white percale sheets
Ordering policy of a 95 percent probability of not stocking out
Demand for white percale sheets = S= 4,600 per year
The store is open 365 days per year.
Every four weeks (28 days) inventory is counted and a new order is placed.
It takes 8 days for the sheets to be delivered.
Standard deviation of demand for the sheets = Sigma = seven per day
There are currently 160 sheets on hand = Stock in hand = 160
How many sheets to be order :
Here the probability of stock out = 5 %
Means Service level = 95 %
The value of Z for service level 95 % = 1.65
Total requirement is 4600 per year .
Stock in hand = 160
so Net requirement = 4600 - 160
= 4440
EOQ = 4440 / 28
= 158.57
Requirement per day = 5600 / 365
= 15.34
Lead time consumption = 8 * 15.34
= 122.72
Reorder Point = Average lead time demand + Safety Stock
= 122.72 + (Service level * standard deviation)
= 122.72 + ( 1.65 * 7)
= 134.27
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Annual Demand = S = 5600 mufflers
Ordering Cost = $ 40 per order
SD = 5 mufflers working per day
Service probability = 90 %
Item cost = Cu = $ 50 per muffer
Lead time = 3 working day
Annual holdings cost = 35 % of item value
= 35 % on $ 50
= $ 17.5 per item
Working days = 300 per year
EOQ = Square root ((2*S*Cp)/(Ch)
= Square root ((2*5600*40)/(17.5)
= 160 Nos
Mufflers required per day = 5600 / 300
= 18.66
Consumption during lead time = 18.66 * 3
Average lead time demand = 55.98
Reorder Point = Average lead time demand + Safety Stock
= 55.98 + (Service level * standard deviation)
= 55.98 + ( 1.38 * 5)
= 62.88
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