Schmears Inc. is a catalog retailer of men's shirts. Daily demand for a particular SKU (style and
Question:
a. Suppose Schmears uses an order-up-to level of 9. What is the average number of shirts on order?
b. Now suppose Schmears uses an order-up-to level of 8. What is the probability during any given day that Schmears does not have sufficient inventory to meet the demand from all customers?
c. Suppose Schmears wants to ensure that 90 percent of customer demand is satisfied immediately from stock. What order-up-to level should they use?
d. Schmears is considering a switch from a "service-based" stocking policy to a "cost- minimization" stocking policy. They estimate their holding cost per shirt per day is $0.01. Forty-five percent of customers order more than one item at a time, so they estimate their stockout cost on this shirt is $6 per shirt. What order-up-to level minimizes the sum of their holding and back-order costs?
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Related Book For
Matching Supply with Demand An Introduction to Operations Management
ISBN: 978-0073525204
3rd edition
Authors: Gerard Cachon, Christian Terwiesch
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