A) If cooking oil can be ordered as needed, what reorder point should be used? B

Question

A) If cooking oil can be ordered as needed, what reorder point should be used? B) If a fixed interval of 30 days is specified, how much safety stock should Harry carry? 2.A manager intends to order a new machine and must now decide on the number of spare parts to order along with the machine. The parts cost $400 each and have no salvage value. The manager has compiled a frequency distribution for the probable usage of spare parts, as shown. For what range of shortage costs would stocking one spare part constitute an optimal decision?

PLEASE SHOW STEPS. No. of Spares Frequency 08 .30 24 18

Explanation / Answer

1)

A) Safety Stock, ss = ZL, Where Z corresponding to service level 7/8 = 1.15

ss = 1.15*2*8^0.5 = 6.5 gallons

Reorder Point, ROP = µ*L + ss = 15*8+7 = 126.5 gallons

B) Safety stock = Z(L+R) = 1.15*2*(8+30)^0.5 = 14.2 gallons

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