You are the procurement manager of a chain that sells shoes. For the upcoming year, you...
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You are the procurement manager of a chain that sells shoes. For the upcoming year, you need to determine when to order how many shoes. You expect to sell 500 shoes every month, and you know that you need to pay a fixed cost of €50 for every order that you place. The holding (carrying) costs per shoe are €15. Your stores are open for 300 days a year. QUESTION A (6 points) Determine an ordering policy that minimizes the total costs. How many shoes do you order every time? How many working days are there between consecutive orders? And what are the total annual costs? In reality, the monthly demand is normally distributed with a standard deviation of 10 shoes. After you placed an order, it takes 2 days for the shoes to arrive to your distribution center. The distribution center then ships the shoes to the stores, where they arrive the day afterwards. QUESTION B (5 points) You want to ensure that the stores do not run out of stock in 98% of the time. Determine when you should place a new order to ensure this. You are the procurement manager of a chain that sells shoes. For the upcoming year, you need to determine when to order how many shoes. You expect to sell 500 shoes every month, and you know that you need to pay a fixed cost of €50 for every order that you place. The holding (carrying) costs per shoe are €15. Your stores are open for 300 days a year. QUESTION A (6 points) Determine an ordering policy that minimizes the total costs. How many shoes do you order every time? How many working days are there between consecutive orders? And what are the total annual costs? In reality, the monthly demand is normally distributed with a standard deviation of 10 shoes. After you placed an order, it takes 2 days for the shoes to arrive to your distribution center. The distribution center then ships the shoes to the stores, where they arrive the day afterwards. QUESTION B (5 points) You want to ensure that the stores do not run out of stock in 98% of the time. Determine when you should place a new order to ensure this.
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QUESTION A To determine the ordering policy that minimizes total costs we need to consider the tradeoff between holding costs and ordering costs To minimize holding costs we should order a quantity th... View the full answer
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