(Furniture Store)  You are the store manager at a large furniture store. One of your products is a study desk. Weekly demand for the desk is normally distributed with mean 40 and standard deviation 20. The lead time from the assembly plant to your store is two weeks and you order inventory replenishments weekly.  Except for part i., you use the order-up-to model to control inventory. Suppose your order-up-to level is S = 220. You are about to place an order and note that your inventory level is 100 and you have 85 desks on order. How many desks will you order? Suppose your order-up-to level is S = 220. You are about to place an order and note that your inventory level is 160 and you have 65 desks on order. How many desks will you order? What is the optimal order-up-to level if you want to target a 98 percent in-stock probability? What is the optimal order-up-to level if you want to target a 98 percent fill rate? ( Hint :  adapt the exact formulae for the newsvendor problem , replacing the single period demand by the demand over lead-plus-review time.) Suppose your order-up-to level is S = 120. What is your expected end of the period on-hand inventory? Suppose your order-up-t level is S = 200. What is your fill rate? Suppose you now decide to maintain a 95 percent in-stock probability for the desk. What is the expected fill rate in this case? Suppose your order-up-to level is S = 120. Your internal cost of capital is 15 percent per year and each desk costs $200. What is your total cost of capital for the year for inventory in the store? Reconsider part h. under the assumption that there is a fixed order cost of $500 and that you target a service level or in stock probability of 98%. What kind of inventory policy do you recommend? What are your recommended policy parameters under this policy?

Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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.  (Furniture Store)  You are the store manager at a large furniture store. One of your products is a study desk. Weekly demand for the desk is normally distributed with mean 40 and standard deviation 20. The lead time from the assembly plant to your store is two weeks and you order inventory replenishments weekly.  Except for part i., you use the order-up-to model to control inventory.

  1. Suppose your order-up-to level is S = 220. You are about to place an order and note that your inventory level is 100 and you have 85 desks on order. How many desks will you order?
  2. Suppose your order-up-to level is S = 220. You are about to place an order and note that your inventory level is 160 and you have 65 desks on order. How many desks will you order?
  3. What is the optimal order-up-to level if you want to target a 98 percent in-stock probability?
  4. What is the optimal order-up-to level if you want to target a 98 percent fill rate? ( Hint :  adapt the exact formulae for the newsvendor problem , replacing the single period demand by the demand over lead-plus-review time.)
  5. Suppose your order-up-to level is S = 120. What is your expected end of the period on-hand inventory?
  6. Suppose your order-up-t level is S = 200. What is your fill rate?
  7. Suppose you now decide to maintain a 95 percent in-stock probability for the desk. What is the expected fill rate in this case?
  8. Suppose your order-up-to level is S = 120. Your internal cost of capital is 15 percent per year and each desk costs $200. What is your total cost of capital for the year for inventory in the store?
  9. Reconsider part h. under the assumption that there is a fixed order cost of $500 and that you target a service level or in stock probability of 98%. What kind of inventory policy do you recommend? What are your recommended policy parameters under this policy?
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