Question: A manager must set up inventory ordering systems for two new items, Gadget and Widget. Gadget is ordered from a supplier and is delivered at
A manager must set up inventory ordering systems for two new items, Gadget and Widget. Gadget is ordered from a supplier and is delivered at once, while Widget is produced inhouse in batches of fixed size. The company operates weeks a year, five days per week, and demand for each item is normally distributed. The company uses a continuous inventory system. The manager has gathered the following information about the items.
tableGadget,WidgetAverage demand, units per year, units per weekStandard deviation, units per week, units per dayUnit cost C$$Production rate, units per dayOrdering costSetup cost$$Annual holding cost,Lead time, weeks, weekService level,
a Compute the optimal order quantity for item Gadget.
b How many orders of item Gadget will be placed per year?
c What should the safety stock be for item Gadget?
d Compute the optimal order quantity for Widget.
e When should the manager reorder item Widget?
f Determine the length of each production run of item Widget, in days.
g What is the time between two consecutive orders of Widget, in weeks?
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