Reference no: EM131021750

PART 1

1. What is the cycle service level associated with the policy? Answer as a percentage with two decimals.

2. Management has suggested that you might want to switch to periodic review, something the supplier was previously against but is now encouraging. You would review the inventory weekly.

If you switch to an (R, S)-policy using the transformations from the lesson, what are the expected total annual costs? Please round to closest integer dollars. Answer without the dollar symbol.

3. Which of the following statements is/are true about the two policies from Part 1 and Part 4? Note that there may be more than one correct answer. Check all boxes that apply.

The expected total annual cost is higher with the (s, Q) policy
The expected total annual cost is higher with the (R, 5) policy
The expected cycle service level is higher with the (s, Q) policy
The expected cycle service level is higher with the (R, 5) policy
None of the above

PART 2

1. What re-order point s should be used for SKU#0172 to ensure a cycle service level of 95%? Round to closest integer.

2. A colleague of Bjorn tells him that there are some weaknesses to the service level metric they are currently employing. "Stockouts are not uncommon, and the metric does not tell us anything about how much of our sales that are affected by the stockouts", he says. "It may be better to use the Item Fill Rate as the target metric".

What re-order point s should be used for SKU#0172 to ensure an Item Fill Rate of 95%? Round to closest integer.

3. R-Taylor has been in discussion with the wholesaler that sells SKU#0172 about the possibility to offer shipments in half pallets. The wholesaler is considering it, but will only do it if R-Taylor is willing to pay a higher price per unit.

Suppose R-Taylor uses an (s, Q)-policy, where Q is determined by the EOQ model and s is set to achieve 95% CSL. If the wholesaler agrees to ship in totes (which fit up to 50 units) at a rate of 30 dollars per tote, but with a 0.25$ increase in purchase price per unit, should R-Taylor accept the offer? Since most of the holding cost is the crowding cost, assume the annual holding cost is still 20 dollars per unit.

Yes, this will reduce total expected costs
No, this will not reduce the total expected costs
There is not enough information in the description to answer the question