A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 75 pounds of Kona coffee beans a day. (Demand can be assumed to be distributed normally, with a standard deviation of 15 pounds per day.) After ordering (Fixed cost-$16 per order), beans are always shipped from Hawaii within exactly four days. Per-pound annual holding costs for the beans are $3. e) What is the safety stock needed to attain a 1% risk of stockout during lead time? f) What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk? g) If management specified that a 2% risk of stockout during lead time is acceptable, would the safety stock holding costs decrease or increase?

A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 75 pounds of Kona coffee beans a day. (Demand can be assumed to be distributed normally, with a standard deviation of 15 pounds per day.) After ordering (Fixed cost-$16 per order), beans are always shipped from Hawaii within exactly four days. Per-pound annual holding costs for the beans are $3. e) What is the safety stock needed to attain a 1% risk of stockout during lead time? f) What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk? g) If management specified that a 2% risk of stockout during lead time is acceptable, would the safety stock holding costs decrease or increase?

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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Inventory Management Ch 12 12.40 Uriel A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 75 pounds of Kona coffee beans a day. (Demand can be assumed to be distributed normally, with a standard deviation of 15 pounds per day.) After ordering (Fixed cost-$16 per order), beans are always shipped from Hawaii within exactly four days. Per-pound annual holding costs for the beans are $3. a) What is the EOQ for Kona Coffee Beans? b) What are the total annual hoding costs of stock for Kona coffee beans? c) What are the total annual ordering costs for Kona coffee beans? d) Assume the management has specified that no more than a 1% risk during stockout is acceptable. What should the reorder point be? e) What is the safety stock needed to attain a 1% risk of stockout during lead time? f) What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk? g) If management specified that a 2% risk of stockout during…
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