invent question
Inventory Exercise
1. Sam’s cat hotel operate 52 weeks/yr, 6 days/week , and uses a continuous review inventory system. It purchases kitty litter for $11.70 per bag. The following information is available about these bags.
Demand = 90 bags/week
Order cost = $54/order
Annual holding cost = 27 %of cost
Desired cycle-service level = 80%
Lead time = 3 weeks (18 working days)
Standard deviation of weekly demand = 15 bags
Current On-hand inventory is 320 bags, with no open order or backorders.
a.
b.
c.
d.
What is the EOQ? What would be the average time between orders (in weeks)?
What should Reorder point be?
An inventory withdrawal of 10 bags was just made. Is it time to reorder?
The store current uses a lot size of 500 bags. What is the annual holding cost of this policy? Annual ordering cost? Without calculating the EOQ, How can you conclude from these two calculations that the current lot size is too large?
e. What would be the annual cost saved by shifting from the 500- bag lot size to the
EOQ?
2. Nationwide Auto Parts uses a periodic reviews inventory control system for one of its stock items. The review interval is six weeks, and the lead time for receiving the materials ordered from its wholesaler is three weeks. Weekly demand is normally distributed, with a mean of 100 units and a standard deviation of 20 units.
a. What is the average and the standard deviation of demand during the protection interval? b. What should be the target inventory level if the firm desire 97.5% stockout protection? c. What should be the target inventory level if the firm desire 99 % Fill Rata?
d. If 350 units were in stock at the time of periodic review, how many units should be order?
3. Weekly demand has been forecast using exponential smoothing for an item with independent demand. The forecast indicates an average demand of 300 per week, 52 weeks per year, and the MAD of the forecast is 20 (recall that the standard deviation of weekly demand
1. Sam’s cat hotel operate 52 weeks/yr, 6 days/week , and uses a continuous review inventory system. It purchases kitty litter for $11.70 per bag. The following information is available about these bags.
Demand = 90 bags/week
Order cost = $54/order
Annual holding cost = 27 %of cost
Desired cycle-service level = 80%
Lead time = 3 weeks (18 working days)
Standard deviation of weekly demand = 15 bags
Current On-hand inventory is 320 bags, with no open order or backorders.
a.
b.
c.
d.
What is the EOQ? What would be the average time between orders (in weeks)?
What should Reorder point be?
An inventory withdrawal of 10 bags was just made. Is it time to reorder?
The store current uses a lot size of 500 bags. What is the annual holding cost of this policy? Annual ordering cost? Without calculating the EOQ, How can you conclude from these two calculations that the current lot size is too large?
e. What would be the annual cost saved by shifting from the 500- bag lot size to the
EOQ?
2. Nationwide Auto Parts uses a periodic reviews inventory control system for one of its stock items. The review interval is six weeks, and the lead time for receiving the materials ordered from its wholesaler is three weeks. Weekly demand is normally distributed, with a mean of 100 units and a standard deviation of 20 units.
a. What is the average and the standard deviation of demand during the protection interval? b. What should be the target inventory level if the firm desire 97.5% stockout protection? c. What should be the target inventory level if the firm desire 99 % Fill Rata?
d. If 350 units were in stock at the time of periodic review, how many units should be order?
3. Weekly demand has been forecast using exponential smoothing for an item with independent demand. The forecast indicates an average demand of 300 per week, 52 weeks per year, and the MAD of the forecast is 20 (recall that the standard deviation of weekly demand