Operations Management
17th Edition
ISBN: 9781259142208
Author: CACHON, Gérard, Terwiesch, Christian
Publisher: Mcgraw-hill Education,
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Chapter 14, Problem 14CQ
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To explain: The likely change on the firm’s on-order inventory.
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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. You use the order-up-to model to control inventory. a. 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? b. 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? c. What is the optimal order-up-to level if you want to target a 98 percent in-stock probability?
In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will:
OA. increase, but more data is needed to say by how much.
OB. increase by 100%
OC. increase by about 41%.
OD. increase by 200%.
OE. either increase or decrease.
Suppose inventory is managed using the order-up-to model. The inventory position is 20and demand in the last period was 10. What is the target in-stock probability? a. 95 percentb. 96 percentc. 97 percentd. 98 percente. 99 percentf. Could be any of the above a–eg. Cannot be any of the above a–e
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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- . (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 ,…arrow_forwardA retailer uses the order-up-to model to manage inventory of an item in a store. The leadtime for replenishments is four weeks and it can place orders weekly. Weekly demand isPoisson with mean 0.10 unit. Its order-up-to level is five and unfilled demand is backordered. What is the coefficient of variation of its orders?arrow_forwardA newsvendor orders the quantity that maximizes expected profit for two products, X and Y. The critical ratio for both products is .8. The demand forecast for both products is 9000 units and both are normally distributed. Product X has more uncertain demand in the sense that it has the larger standard deviation. Of which of the two products does the newsvendor order morea. Product X because it has less certain demand. b. Product Y because it has more certain demand. c. The order quantities are the same because they have the same critical ratio. d. More information is needed to determine which has the higher order quantity.arrow_forward
- (Round your answer to 2 decimal places.) A retailer uses the order-up-to model to manage inventory of an item in a store. The lead time for replenishments is 4 weeks and it can place orders weekly. Weekly demand is Poisson with mean 0.05 unit. Its order-up-to level is 5 and unfilled demand is backordered. What is the coefficient of variation of its orders?arrow_forwardA firm manages its inventory with an order-up-to model. Each period is one day, thelead time is two days, the order-up-to level is 10, and its inventory position at the start ofa day (before it submits an order for that day) is –4. Which of the following statementsis definitely true? a. Demand was four units yesterday.b. Demand was 10 units yesterday.c. There are at least four units backordered.d. There are 14 units on order before it orders today.e. After today’s order, there will be 14 units on order.f. It will receive more inventory todayarrow_forward12. A restaurant uses an average of 8 jars of a special sauce every day. When they place an order, the jars arrive to the restaurant in a day (lead time is 1 day). Daily usage of sauce has a standard deviation of 3 jars. They think their demand during the lead time can be modelled with normal distribution. The manager is willing to accept no more than a 10 percent risk of stockout during lead time. Calculate at which level of inventory a new order needs to be placed (i.e. calculate the reorder-point(ROP)).arrow_forward
- The best quantity to order One of the formulas for inventorymanagement says that the average weekly cost of ordering, payingfor, and holding merchandise iswhere q is the quantity you order when things run low (shoes,TVs, brooms, or whatever the item might be); k is the cost ofplacing an order (the same, no matter how often you order); c isthe cost of one item (a constant); m is the number of items soldeach week (a constant); and h is the weekly holding cost per item(a constant that takes into account things such as space, utilities,insurance, and security). Find dA>dq and d2A>dq2.arrow_forwardOriental Healthcare is a multi-specialty hospital catering to a variety of illnessesconnected to the heart and respiratory systems. The demand for a class of medicalconsumable is generally random. Recently, an examination of the stores records overa period of 10 weeks revealed the following weekly consumption pattern:Week No. Consumption(Units)1 1202 1093 894 1405 1106 1457 778 1209 13010 80The supplier of the item takes on an average 2 weeks to deliver once the order isplaced. Design an appropriate inventory control policy for a periodic review systemfor a review frequency of 4 weeks for a 99% service levelarrow_forwardA product’s demand in each period follows a normal distribution with mean of 60 and standard deviation of 10. The order-up-to level is 270 and the lead time is 2 weeks. Orders are placed every 2 weeks. What is the expected on-hand inventory? 140 80 31 8arrow_forward
- A retailer is considering two possible definitions of “in stock”:I. A product is in stock if it has at least one unit on hand at the end of the day.II. A product is in stock if it has satisfied all demand during a day.For a fixed order-up-to level, which definition yields the higher in-stock probability? a. Definition I because if one unit is on hand, then all demand must have been satisfied.b. Definition II because the firm is more likely to satisfy all demand than to end theday with one unit on hand.c. Definition II because if all demand is satisfied, then there must be some inventory left over.d. Either one is possible because it will depend on the particular order-up-to policychosen, the distribution function of demand, and the lead timearrow_forwardOrder-up to model is that have been ordered but have not been received. Order up to level is when stock levels are periodically reviewed, and an amount of the item is ordered to return stock levels to the target level. Which of the following is true about the order-up to model? A. It prevents a company from being out of stock B. It is useful for a goods with a short shelf life C. As lead time decreases, inventory levels will decrease.arrow_forwardThis type of problem can be recognized when an order interval is given (e.g.,inventory is ordered every 10 days) along with the demand rate, lead time, and quantity on hand atorder time. A lab orders a number of chemicals from the same supplier every 30 days. Lead time is five days.The assistant manager of the lab must determine how much of one of these chemicals to order. Acheck of stock revealed that eleven 25-milliliter (ml) jars are on hand. Daily usage of the chemical isapproximately normal with a mean of 15.2 ml per day and a standard deviation of 1.6 ml per day. Thedesired service level for this chemical is 95 percent.a. How many jars of the chemical should be ordered?b. What is the average amount of safety stock of the chemical?arrow_forward
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