Concept explainers
The Farmer’s Wife is a country store specializing in knick-knacks suitable for a farmhouse décor. One item experiencing a considerable buying frenzy is a miniature Holstein cow. Average weekly demand is 30 COWS, with a standard deviation of 5 cows. The cost to place a replenishment order is $15 and the holding cost is $0.75/cow/year. The supplier, however, is in China. The lead time for new orders is 8 weeks, with a standard deviation of 2 weeks. The Farmer’s Wife, which is open only 50 weeks a year, wants to develop a continuous review inventory system for this item with a cycle-service level of 90 percent.
- Specify the continuous review system for the cows. Explain how it would work in practice.
- What is the total annual cost for the system you developed?
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Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
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