Sheri is a car distributor in a rural area. She has customers that own relatively old...
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Sheri is a car distributor in a rural area. She has customers that own relatively old cars. To main- tain good customer service, Sheri keeps a small inventory of spare parts for old-model cars. One item is brake boosters. It is a slow-moving item, and therefore she uses the periodic review policy with a review period of two months. The annual demand for booster sets has a normal distribution with mean of 15 and standard deviation of 5. Because this item is out of production, delivery lead time is five months. The cost of a set of boosters is $500. Sheri places high value on maintaining customer satisfaction. Therefore, she considers goodwill to be crucial, and estimates the shortage cost to be $5000. Shortages are backlogged, and annual inventory holding cost is 20 percent. (a) Find the optimal target inventory. (b) Find the implied service level for policy I and policy 2. Discuss. (c) Find the safety stock for a set of brake boosters. (d) Find the expected annual cost of the periodic review policy. (e) Suppose a continuous review policy is used. Find the safety stock. Sheri is a car distributor in a rural area. She has customers that own relatively old cars. To main- tain good customer service, Sheri keeps a small inventory of spare parts for old-model cars. One item is brake boosters. It is a slow-moving item, and therefore she uses the periodic review policy with a review period of two months. The annual demand for booster sets has a normal distribution with mean of 15 and standard deviation of 5. Because this item is out of production, delivery lead time is five months. The cost of a set of boosters is $500. Sheri places high value on maintaining customer satisfaction. Therefore, she considers goodwill to be crucial, and estimates the shortage cost to be $5000. Shortages are backlogged, and annual inventory holding cost is 20 percent. (a) Find the optimal target inventory. (b) Find the implied service level for policy I and policy 2. Discuss. (c) Find the safety stock for a set of brake boosters. (d) Find the expected annual cost of the periodic review policy. (e) Suppose a continuous review policy is used. Find the safety stock.
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a The optimal target inventory is 500 The optimal target inventory is the level of inventory that mi... View the full answer
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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