Reference no: EM13512597
The purchasing agent responsible for ordering cotton underwear for Ace Retail Stores has come up with the following information:
Sol:
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Maximum daily usage
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100 packages
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Average daily usage
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80 packages
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Lead time
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9 days
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Economic order quantity
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3,500 packages
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1. Compute the safety stock.
2. Calculate the reorder point.
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Maximum daily usage
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100 packages
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Average daily usage
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80
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Excess
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20
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Lead time
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X9 days
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Safety stock
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180 packages
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2. Reorder point = Average usage during lead time + Safety stock
= 80 packages X 9 days + 180 packages = 720 + 180 = 900 packages
Harrington &Sons, Inc., would like to determine the safety stock to maintain for a product so
that the lowest combination of stockout cost and carrying cost will result. Each stockout will
cost $75; the carrying cost for each safety stock unit will be $1;the product will be ordered five
times a year. The following probabilities of running out of stock during an order period are
associated with various safety stock levels:
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Safety Stock Level
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Probability of Stock out
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10 units
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40%
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20
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20
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40
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10
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80
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5
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Using the expected value approach, determine the safety stock level.
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Discuss the organizational and manager-behavior
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