Operations Management
17th Edition
ISBN: 9781259142208
Author: CACHON, Gérard, Terwiesch, Christian
Publisher: Mcgraw-hill Education,
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Chapter 14, Problem 11CQ
Summary Introduction
To identify: The impact on the order-up-to level.
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A product's demand over (/+1) periods follows a normal distribution
with mean of 80 and standard deviation of 20. The order-up-to level
is 100. What is the in-stock probability?
0.8413
0.5987
O 0.3413
=
A small manufacturing facility stocks a single-use filter, part SUF100, for their production process. It costs the manufacturer $1.50 per filter to purchase and $100 per order
placed. They use a holding cost of 28% annually. Monthly demand for SUF100 follows a normal distribution with u 280 and σ = = 77. The parts arrive five months after an
order is placed. If a stockout occurs, the demand is backlogged, not lost, and costs the production facility $12.80 per part backordered.
1. Find the optimal order quantity and reorder level to minimize average annual cost of holding, setup, and stockout.
2. What is the average annual cost of holding, setup, and stockouts, when the Q,R-policy in part 1 is used?
A customer buys 1 ABC Jan 35 put for a premium of $3 and simultaneously buys 100 shares of ABC stock for $35 per share. The customer will break even when the stock is selling for what price per share at expiration?
Chapter 14 Solutions
Operations Management
Ch. 14 - Demand in each period follows the same normal...Ch. 14 - Prob. 2CQCh. 14 - For products with slow-moving demandfor example,...Ch. 14 - Prob. 4CQCh. 14 - Prob. 5CQCh. 14 - Prob. 6CQCh. 14 - Prob. 7CQCh. 14 - Prob. 8CQCh. 14 - If the target in-stock probability increases, then...Ch. 14 - Prob. 10CQ
Ch. 14 - Prob. 11CQCh. 14 - Prob. 12CQCh. 14 - Prob. 13CQCh. 14 - Prob. 14CQCh. 14 - Prob. 15CQCh. 14 - Prob. 16CQCh. 14 - Prob. 17CQCh. 14 - Prob. 18CQCh. 14 - Prob. 19CQCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - You are the owner of Hotspices.com, an online...Ch. 14 - Prob. 5PACh. 14 - Prob. 6PACh. 14 - Prob. 7PACh. 14 - Prob. 1CCh. 14 - Prob. 2CCh. 14 - Prob. 3CCh. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...Ch. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...
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- Please answer questions 9 and 10 based on this data. Daily demand for packages of five videotapes at a warehouse store is found to be normally distributed with a mean of 50 and a standard deviation of 5. When the store orders more tapes, the orders take four days to arrive. Assume the store is open 360 days a year. If the store wants the probability of stocking out to be no more than 5%, and demand each day is independent of the day before, what should be the safety stock? Please round your answer to two decimals. Safety stock= 17 Question 10 4 pts If the store wants the probability of stocking out to be no more than 5%, and demand each day is independent of the day before, what reorder point should be set? Please round your answer to two decimals. Reorder point=arrow_forwardAn electronic manufacturer in San Francisco receives its motherboards from a supplier in Hong Kong. The lead time for orders is 3 weeks. One of their board costs $16 per unit and the holding cost for this board is $0.5 per week. They manage their inventory to achieve a 97 percent in-stock probability. Weekly demand is for 150 boards with a standard deviation of 200. Use the following table when needed: In-stock probability 99% 98% 97% 96% Z value 2.33 2.05 1.88 1.75 a. How many boards do they have on on order on average? boards b.How many boards do they have on hand on average? boards c. For this board what is the total holding cost incurred per week? per week (Round your answer to 2 decimal places.) d.What is the holding cost they incur per board? per boardarrow_forwardPlease do not give solution in image format thanku Deltic sells this component for 55 per unit with a 4-month delivery lead time. Assume Deltic covers all transportation and related processing until delivery. TCX’s demand forecast for the upcoming selling season (12 months) is a normal distribution with mean 13500 and standard deviation 3736,4 . TCX sells each unit, after integrating their proprietary software, for 135. Assume that TCX uses a holding cost rate of 25 %, and any leftover units can be sold for 30 on average. Due to the long lead time and high minimum order quantity required, TCX is planning on a single order from Deltic to meet their needs in the next year. How many of these components should TCX order? Calculate the resulting expected annual profits for TCX.arrow_forward
- Suppose that the owner of the campus bar, Nick’s, has determined that demand for beer during leadtime averages 5000 bottles. Nick, the owner, believes the demand during lead time can be describedby a normal distribution with a mean of 5000 bottles and a standard deviation of 300 bottles. Nick iswilling to accept a stockout risk of approximately 4 percent. Determine the appropriate z value to use.Calculate how much safety stock Nick should hold. Also determine the reorder point.arrow_forwardXYZ Company must order tires from its warehouse. It costs $10400 to place an order and to review the inventory level. Annual tire sales are normally distributed with mean 18000 and variance 4,000,000. It costs $8 per year to hold a tire in inventory, and each order arrives two weeks after being placed. The Company uses periodic review (R, S) policy. What is the review interval R (in years), estimated using EOQ.? Select one: a. 0.3801 b. 0.19 c. 0.2687 d. 1.075 e. 0.1267arrow_forwardSuppose that the manager of a construction supply house determined from historical recordsthat demand for sand during lead time averages 50 tons. In addition, suppose the managerdetermined that demand during lead time could be described by a normal distribution thathas a mean of 50 tons and a standard deviation of 5 tons. Answer these questions, assumingthat the manager is willing to accept a stockout risk of no more than 3 percent:a. What value of z is appropriate?arrow_forward
- The demand faced by CBA company each week is estimated to be normally distributed with a mean of 1000 units and a standard deviation of 250. Lead time of delivery is fixed at 2 weeks. Ordering cost is $800 per order, variable cost per unit ordered is $4, the inventory carrying charge is 20% per year. Assume 50 weeks per year. CBA would like the probability to satisfy customer demand be 95%. Find the (Q,R) policy. If the leadtime is 2 weeks and a standard deviation of 1 week. Find the (Q,R) policy. What is the impact of the weekly demand’s standard deviation on the (Q,R) policy?arrow_forwardConsider a product for which the average demand is 70 items per day (for 365 days per year) and the standard deviation of demand is 10 per day. The product value is $3, the order cost is $30 per order, and the inventory carrying cost is 20% per year. The stockout cost is $0.50 per unit short. The probability of being in stock is to be 99%. The supplier has an average lead time of 5 days with a standard deviation of 1.5 days. a) Design a reorder point system using the 99% probability of being in stock and (i) state the policy (order size and when to order) and (ii) the total annual cost. Policy (order size and when to order): ____________________________________ Total annual cost = ________ b) If the product must be ordered in multiples of 500 items, design a reorder point system using the 99% probability of being in stock and (i) state the policy (order size and when to order), (ii) the total annual cost,…arrow_forwardDaily demand for a product is 10 units. The standard deviation of demand during the review and lead time is 20 units. The review period is 30 days and the lead time is 14 days. At the time of review there are 150 units in stock. If the probability of stockout should not exceed 2%, how many units should be ordered?arrow_forward
- A factory orders supplies every 8 days. The lead time for deliveries is 3 days. Demand for butter averages 20 pounds per day with a standard deviation of 2.3 pounds. The holding cost for butter is $0.37 per pound per day. The factory wants to achieve an in-stock probability rate of 99.87% for butter. On average, how many pounds of butter will the factory have on order?arrow_forwardA newsvendor orders 8000 units. Demand is normally distributed with a mean of9000 and a standard deviation of 2000. What is the stockout probability?arrow_forwardAnnual demand for a product is normally distributed with mean 2300 units and standard deviation 150 units. Lead time is 4 weeks. Assume 1 year = 52 weeks. What is the standard deviation of the demand during lead time? Select one:a. 1800b. 600c. 41.6d. 11.54e. 2.654 times 10 to the power of 4arrow_forward
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