Dunstreet's Department Store would like to develop an inventory
ordering policy with a 99 percent probability of not stocking out.
To illustrate your recommended procedure, use as an example the
ordering policy for white percale sheets.
Demand for white percale sheets is 4,300 per year. The store is
open 365 days per year. Every four weeks (28 days) inventory is
counted and a new order is placed. It takes 12 days for the sheets
to be delivered. Standard deviation of demand for the sheets is
eight per day. There are currently 160 sheets on-hand.
a. How many sheets should you order? (Use Excel's NORM.S.INV() function or z-table to find the z value. Do not round intermediate calculations. Round z value to 2 decimal places and final answer to the nearest whole number)
Multi-period Model- Fixed-Order Quantity Model (Q-model)
Information available is as under:
D = Days operational |
365 |
days |
A = Annual Demand |
4300 |
sheets per year |
d = Average Demand rate per time period |
11.78 |
per day |
σ = Standard Deviation |
8 |
bags |
LT = Performance cycle, another term for total lead time |
12 |
days |
z for 99% target service level = NORM.S.INV(0.99) = |
2.33 |
|
R = Reorder period or Review Period |
28 |
days |
T1 = time increment used for calculating standard deviation of demand |
1 |
days |
Stock on hand (current at the time of review) |
160 |
Sheets |
Answer a:
Restocking level = (d*(R+LT))+(z*(σ*(R+LT)) = |
1217.833 |
sheets |
Number of sheets to order = Restocking level – Stock on hand = 1217.833 -160 = 1056.833 ≈ |
1057 |
sheets |
Therefore, 1057 sheets needs to be ordered at this review period.
Dunstreet's Department Store would like to develop an inventory ordering policy with a 99 percent probability...
Dunstreet's Department Store would like to develop an inventory ordering policy of a 95 percent probability of not stocking out. To illustrate your recommended procedure, use as an example the ordering policy for white percale sheets. Demand for white percale sheets is 3,400 per year. The store is open 365 days per year. Every two weeks (14 days) inventory is counted and a new order is placed. It takes 9 days for the sheets to be delivered. Standard deviation of...
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