The demand for a product in a UPS warehouse follows a normal distribution , for which the mean is 1,000 units per month and the standard deviation is 200 units per month. The lead time is 0.25 month for the warehouse. The product is valued at $80 per unit in the warehouse. The ordering cost is $20 and the inventory carrying cost is set at 2% per month. A service level of 85% is required during the lead time. The out-of-stock cost is $10 per unit. Assuming the manager in this warehouse uses Re-Order point inventory control policy. The manager decides to switch to periodical review policy and order once every month. If the manager wants to have a service level of 90% what should be his order up to level (MAX)? The manager decides to switch to a periodical review policy and order once every month. If the manager wants to have a service level of 90% how much is the safety stock in the warehouse?

The demand for a product in a UPS warehouse follows a normal distribution , for which the mean is 1,000 units per month and the standard deviation is 200 units per month. The lead time is 0.25 month for the warehouse. The product is valued at $80 per unit in the warehouse. The ordering cost is $20 and the inventory carrying cost is set at 2% per month. A service level of 85% is required during the lead time. The out-of-stock cost is $10 per unit. Assuming the manager in this warehouse uses Re-Order point inventory control policy. The manager decides to switch to periodical review policy and order once every month. If the manager wants to have a service level of 90% what should be his order up to level (MAX)? The manager decides to switch to a periodical review policy and order once every month. If the manager wants to have a service level of 90% how much is the safety stock in the warehouse?

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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