A GE lighting warehouse has a throughput of flood lights of 2,000/day. The warehouse manager orders a batch of 28,000 flood lights (equivalent to a 14 day supply. Flood lights are received into the warehouse 10 days after the manager places the order. The manager re-orders when the inventory in the warehouse drops to 20,000 units. The estimated holding cost of a flood light is $20. Task 1: Group discussion - how do you think that the (forecast) throughput level was set at 2000 units per day? Sketch a graph of forecasted inventory levels under the above conditions. This graph assumes "ideal" conditions. During the 10 day replenishment lead time one of 2 things will occur. 1. Actual demand will be less than 20,000, resulting in excess inventory 2. Actual requirements will be greater than 20,000 resulting in a stockout. If demand is equally likely to be above or below 20,000 flood lights what is the probability of a stockout? What are the business implications of a stockout? Task 2: The average lead-time demand was previously stated as 20,000 unis. Consider that the actual demand for floodlights varies daily. Suppose that the standard deviation of lead-time demand is 5000 units. The warehouse currently orders a 14day supply each time the inventory level drops to 24,000units. What is the service level in terms of the proportion of order cycles over which the warehouse will have stock to meet customer demand? What are the average total inventory and average flow time? Task 3: In task 2 we determined that the service level was 78.8% . At this service level there have been a high number of complaints from customers. The company wishes to increase service level but needs to determine how much this will cost in inventory for specific service levels. Complete the following table for different service levels. Service Level Z Value Safety Inventory Reorder Point 85% 90% 95% 99%