exercise supply chain
Exercise Lecture 1 – Chapter 2 Inventory Management
1. A drugstore sells bandages for $5 per box. The monthly demand for this product has a normal distribution with a mean of 100 and a standard deviation of 30. The store adopts a continuous review policy in which the order quantity equals the average demand for one month and the reorder point equals 43 boxes. The lead time for an order is one week, where each month contains exactly four weeks.
a. What is the cycle service level for this product? (see appendix for the look-up tables of a standard normal distribution)
b. What is the fill rate for this product?
c. The drugstore wants to guarantee a cycle service level of 95% by adjusting the reorder level. What should be the minimal value of the reorder point?
d. The drugstore wants to guarantee a fill rate of 95% by adjusting the reorder level. What should be the minimal value of the reorder point?
e. What would be the average relative difference in holding cost when the drugstore switches from the policy provided by the answer in part c to the policy provided by the answer in part d?
2. Suppose you are a trader in the vegetable and fruit business and you want to buy fresh tomatoes. A box of tomatoes costs $0.40 and you sell it for $1.20. When a customer observes a stock out, the customer is likely to change to a competitor, which results in a loss of goodwill that is quantified as $0.50. Any remaining boxes at the end of the week are sold for $0.15. Suppose it was observed that the demand per week ranges from 15 boxes to 21 boxes. Based on the demand observations in the last 50 weeks, the weekly demand forecast is as follows:
The owner needs to place an order for tomatoes for the next week. How many boxes should (s)he order to maximize the expected profit?
3. Wohl's Discount Store sells toy race cars with a wholesale price of $5. The estimated annual demand ranges from 4,225 to 5,625 race cars. The fixed order cost is $50, whereas the annual
1. A drugstore sells bandages for $5 per box. The monthly demand for this product has a normal distribution with a mean of 100 and a standard deviation of 30. The store adopts a continuous review policy in which the order quantity equals the average demand for one month and the reorder point equals 43 boxes. The lead time for an order is one week, where each month contains exactly four weeks.
a. What is the cycle service level for this product? (see appendix for the look-up tables of a standard normal distribution)
b. What is the fill rate for this product?
c. The drugstore wants to guarantee a cycle service level of 95% by adjusting the reorder level. What should be the minimal value of the reorder point?
d. The drugstore wants to guarantee a fill rate of 95% by adjusting the reorder level. What should be the minimal value of the reorder point?
e. What would be the average relative difference in holding cost when the drugstore switches from the policy provided by the answer in part c to the policy provided by the answer in part d?
2. Suppose you are a trader in the vegetable and fruit business and you want to buy fresh tomatoes. A box of tomatoes costs $0.40 and you sell it for $1.20. When a customer observes a stock out, the customer is likely to change to a competitor, which results in a loss of goodwill that is quantified as $0.50. Any remaining boxes at the end of the week are sold for $0.15. Suppose it was observed that the demand per week ranges from 15 boxes to 21 boxes. Based on the demand observations in the last 50 weeks, the weekly demand forecast is as follows:
The owner needs to place an order for tomatoes for the next week. How many boxes should (s)he order to maximize the expected profit?
3. Wohl's Discount Store sells toy race cars with a wholesale price of $5. The estimated annual demand ranges from 4,225 to 5,625 race cars. The fixed order cost is $50, whereas the annual