What is the optimal target in-stock rate for the CPU

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Reference no: EM133827681

Question

Del Computers Inc. is an assemble-to-order laptop maker. Currently they produce two models of laptops - Attitude A and Attitude B (referred to as A and B, respectively). A and B use different types of central processing units (CPUs). Del replenishes these two types of CPUs every day according to a base-stock policy. The daily demand for each of the two laptops follows a normal distribution with a mean of 100 units and a standard deviation of 30 units. The holding cost rate and backorder cost rate for the CPU of A are h = $0.2 per day per unit and b = $0.8 per day per unit. The cost rates for the CPU of B are the same as those of A. Since both types of CPUs are ordered from a same vendor, the lead times for both CPUs are the same. It takes five business days for an order to be delivered.

1. What is the optimal target in-stock rate for the CPU for Attitude A? Show your answer in percentage, e.g., 50 for 0.5.

2. What is the optimal base-stock level for Attitude A? If your answer is not an integer, provide at least three decimal places.

3. Consider Attitude A alone. How does the average pipeline (on-order) inventory change if the lead time increases?

a. Remains the same

b. Increases

c. Decreases

4. Consider Attitude A alone. How does the average pipeline (on-order) inventory change if the demand variability increases?

a. Remains the same

b. Increases

c. Decreases

5. The management decides to use a generic type of CPU for both A and B. The lead time L remains to be 5 days. Suppose that the management wants to maintain the same in-stock rate in your answer to Q20 for both laptop models, what will be the resulting base-stock level for this generic CPU? If your answer is not an integer, provide at least three decimal places.

6. How did the total safety-stock inventory kept for these two products change after the decision to use a generic CPU?

a. Remains the same

b. Increases

c. Decreases

Reference no: EM133827681

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