The manager of CEED INC in Orlando realizes that the store often faces stock outs for...
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The manager of CEED INC in Orlando realizes that the store often faces stock outs for brake pads. You suspect there might be a problem with the replenishment policy, thus you decide to gather more data. The demand for brake pads turns out to be normally distributed. The mean demand for one week is 200 packages and the standard deviation is 20 packages. CEED INC cost for Brake pads is $10 per package. The cost of carrying Brake pads in inventory at the market is $2 per package per week. In addition, the market incurs a cost of $75 for placing an order and it takes 1 week to receive the delivery. Consider 52 weeks in a year. How many packages of brake pads should CEED INC order at a time (assume continuous review policy)? Compute the safety stock (units of packages) needed to maintain a service level of 95%. What is the annual holding cost for carrying this safety stock? Compute the reorder point for 95% service level. How much additional safety stock would be needed if CEED INC wishes to increase the service level from 95% to 98% ? What is the additional cost associated with this increase in the safety stock? (Note: z-values corresponding to standard normal probabilities can be calculated using Excel or can be found in the table provided at the end of the problem) Table of z-values Probability z-value Probability z-value 2.326 0.89 1.227 2.054 0.88 1.175 1.881 0.87 1.126 1.751 0.86 1.080 1.645 0.85 1.036 1.555 0.84 0.994 1.476 0.83 0.954 1.405 0.82 0.915 1.341 0.81 0.878 1.282 0.80 0.842 0.99 0.98 0.97 0.96 0.95 0.94 0.93 0.92 0.91 0.90 The manager of CEED INC in Orlando realizes that the store often faces stock outs for brake pads. You suspect there might be a problem with the replenishment policy, thus you decide to gather more data. The demand for brake pads turns out to be normally distributed. The mean demand for one week is 200 packages and the standard deviation is 20 packages. CEED INC cost for Brake pads is $10 per package. The cost of carrying Brake pads in inventory at the market is $2 per package per week. In addition, the market incurs a cost of $75 for placing an order and it takes 1 week to receive the delivery. Consider 52 weeks in a year. How many packages of brake pads should CEED INC order at a time (assume continuous review policy)? Compute the safety stock (units of packages) needed to maintain a service level of 95%. What is the annual holding cost for carrying this safety stock? Compute the reorder point for 95% service level. How much additional safety stock would be needed if CEED INC wishes to increase the service level from 95% to 98% ? What is the additional cost associated with this increase in the safety stock? (Note: z-values corresponding to standard normal probabilities can be calculated using Excel or can be found in the table provided at the end of the problem) Table of z-values Probability z-value Probability z-value 2.326 0.89 1.227 2.054 0.88 1.175 1.881 0.87 1.126 1.751 0.86 1.080 1.645 0.85 1.036 1.555 0.84 0.994 1.476 0.83 0.954 1.405 0.82 0.915 1.341 0.81 0.878 1.282 0.80 0.842 0.99 0.98 0.97 0.96 0.95 0.94 0.93 0.92 0.91 0.90
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Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
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