Lucia Morales is managing a store of the low-cost garment retailer Comfy Clothes, specializing in basic...

   

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Lucia Morales is managing a store of the low-cost garment retailer Comfy Clothes, specializing in basic clothing items such as underwear and t-shirts. The management of Comfy Clothes has decided that the target cycle service level for all items in a store should be 97%. This means that every once in a while, popular items sell out. In these cases -- although some customers may come back if what they look for is not available -- unsatisfied demand is lost. The inventory of the store is continuously reviewed by the ERP system for all items. The replenishment lead time differs between items and suppliers/wholesalers. For a particular item, SKU#0172, it takes 10 days from the time a purchase order is placed at the wholesaler until the shipment arrives at the store. The demand for SKU#0172 is even throughout the year. Yearly demand closely resembles a Normal distribution, with mean 1,600 and standard deviation 130. Assume 7 days per week, 52 weeks per year. Currently, item SKU#0172 is purchased in batches of 120, which is what fits in a full pallet from the wholesaler. They do not have to order in multiples of 120, this is simply the number of units that fit on a pallet. While Lucia Morales sees the benefit of using full pallet shipments, the shipments take up valuable retail space when they arrive. Right now the backroom of the store is becoming increasingly crowded. She has been thinking about changing the policy in the system and not ordering full pallets of SKU#0172 each time. She believes the inputted holding cost does not capture the crowding effect in the store. The system uses the EOQ-model to determine the replenishment order quantity Q. Suppose the order cost is 55 dollars per pallet, independently of how many units are on the pallet. With Lucia's new estimate, the annual holding cost per item is 18 dollars. Since we use the EOQ model, let demand for SKU#0172 be constant at 1,600 units per year. What is the optimal replenishment order quantity Q as implied by the EOQ-model for SKU# 0172? Round to closest integer in number of units. 1 X Answer: 99 A colleague of Lucia tells her that there are some weaknesses to the service level metric they are currently employing. "Stockouts are not uncommon, and the metric does not tell us anything about how much of our sales are affected by the stockouts", he says. "It may be better to use the Item Fill Rate as the target metric". What reorder point s should be used for SKU# 0172 to ensure an Item Fill Rate of 97%? Round to closest integer. 1 1 * Answer: 59 Lucia Morales is managing a store of the low-cost garment retailer Comfy Clothes, specializing in basic clothing items such as underwear and t-shirts. The management of Comfy Clothes has decided that the target cycle service level for all items in a store should be 97%. This means that every once in a while, popular items sell out. In these cases -- although some customers may come back if what they look for is not available -- unsatisfied demand is lost. The inventory of the store is continuously reviewed by the ERP system for all items. The replenishment lead time differs between items and suppliers/wholesalers. For a particular item, SKU#0172, it takes 10 days from the time a purchase order is placed at the wholesaler until the shipment arrives at the store. The demand for SKU#0172 is even throughout the year. Yearly demand closely resembles a Normal distribution, with mean 1,600 and standard deviation 130. Assume 7 days per week, 52 weeks per year. Currently, item SKU#0172 is purchased in batches of 120, which is what fits in a full pallet from the wholesaler. They do not have to order in multiples of 120, this is simply the number of units that fit on a pallet. While Lucia Morales sees the benefit of using full pallet shipments, the shipments take up valuable retail space when they arrive. Right now the backroom of the store is becoming increasingly crowded. She has been thinking about changing the policy in the system and not ordering full pallets of SKU#0172 each time. She believes the inputted holding cost does not capture the crowding effect in the store. The system uses the EOQ-model to determine the replenishment order quantity Q. Suppose the order cost is 55 dollars per pallet, independently of how many units are on the pallet. With Lucia's new estimate, the annual holding cost per item is 18 dollars. Since we use the EOQ model, let demand for SKU#0172 be constant at 1,600 units per year. What is the optimal replenishment order quantity Q as implied by the EOQ-model for SKU# 0172? Round to closest integer in number of units. 1 X Answer: 99 A colleague of Lucia tells her that there are some weaknesses to the service level metric they are currently employing. "Stockouts are not uncommon, and the metric does not tell us anything about how much of our sales are affected by the stockouts", he says. "It may be better to use the Item Fill Rate as the target metric". What reorder point s should be used for SKU# 0172 to ensure an Item Fill Rate of 97%? Round to closest integer. 1 1 * Answer: 59

Answer rating: 100% (QA)

To calculate the Economic Order Quantity EOQ for SKU0172 we can use the EOQ formula textEOQ sqrtfrac... View the full answer