How much safety stock is there in Genzo ordering policy

Assignment Help Operation Management

Reference no: EM132180480

Ohmbots is a robotic toy retail shop. They buy large amounts of robotic toys from a manufacturer in China. Genzo, the proprietor of Ohmbots, wants to make sure that he never runs out of toy robots. Genzo places an order every other month, and orders enough to raise the inventory to 5 months of supply. So if the inventory at start of the month is only 1.5 months of supply, then Genzo will order 3.5 months of supply that month. The robot are bought from China for $11 each, and sold for $30 each. The replenishment lead time is two months. Monthly demand is approximately normally distributed with mean 140 and standard deviation 85. Assume 10% annual holding cost rate.

1. How many toy robots, on average, would you expect Genzo to order at each occasion?

2. How much safety stock is there in Genzo's ordering policy?

3. What is the probability that whenever Genzo places an order, he will run out of inventory before the order arrives? Write in decimals, NOT in percentages. Round to the 3rd decimal point.

4. Suppose Genzo wants to have less than 1% probability of stocking out with each order occasion. What is the minimum amount of base stock (B) to achieve that goal?

5. Genzo thinks having a safety factor of 1.7 is sufficient, as it has less than 5% chance to stock out. In this case, what is the annual holding cost?

6. What is the fill rate if Genzo decides on a policy with a safety factor of 1.7? Write the answer in decimals, NOT in percentage. Round to 3 decimal points.

Reference no: EM132180480

Questions Cloud

Which statement concerning product modifications : Which statement concerning product modifications is NOT correct? A Pareto Distribution is similar to an ABC classification.

Explain the difference between hedging and speculating : Explain the difference between "hedging" and "speculating" by explaining why someone who wishes to "hedge" against inflation might choose to purchase gold.

Write about why you chose this particular career : Write about why you chose this particular career. Explain how you will prepare yourself to enter into the career field.

How might your likely chosen profession be affected : What UK professions are likely to experience increased opportunities on the Continent as a result of the 1992 measures aimed at freeing the labor market?

How much safety stock is there in Genzo ordering policy : How much safety stock is there in Genzo's ordering policy?

Why is part of the tax shifted to workers : Describe the impact of a payroll tax on wages and employment in a competitive industry. Why is part of the tax shifted to workers?

Most common bases for grouping jobs into departments : Discuss the rationale and the most common bases for grouping jobs into departments.

Bank foreclosure on the property : A debtor defaulted on her house payments. Under what circumstances might a court not allow the bank's foreclosure on the property?

Do immigrants reduce the wages of native workers : Why does the payroll tax have the same impact on wages and employment regardless of whether it is imposed on workers or on firms?

User Account

All Pages