This is a 2 part question because I cannot split it apart:
Part 1:
Suppose that an auto part in a manufacturer's inventory has the following characteristics:
|
Forecast of demand
|
1,250 cases per week
|
|
Forecast error, std. dev.
|
475 cases per week
|
|
Lead Time
|
2.5 weeks
|
|
Carrying Cost
|
30% per year
|
|
Purchase Price, delivered
|
$56 per case
|
|
Replenishment Order Cost
|
$40 per order
|
|
Stockout Cost
|
$10 per case
|
|
Probability of being in stock during the lead time, P
|
80%
|
- Design a reorder point control system for this part, given the assigned P. How would you state the inventory control policy if the ROP > Q*?
- Design a periodic review system for this part. Now assume that the probability of being in stock extends to the order interval plus lead time.
Part 2:
Repeat question above, but include that the lead time is normally distributed with a standard deviation of 0.5 weeks.