What will be the average time between transactions

Assignment Help Operation Management

Reference no: EM132127596

Harvey’s Specialty Shop is a popular spot that specializes in international gourmet foods. One of the items that Harvey sells is a popular mustard that he purchases from an English company. The mustard costs $10 a jar and requires a 2-month lead time for replenishment of stock. The replenishment time is almost constant. Harvey uses a 20% annual interest rate to compute holding costs. Bookkeeping expenses for placing an order amount to about $50. During the 2-month supply time, Harvey estimates that he sells an average of 100 jars but there is substantial variation. He estimates the standard deviation of demand for each 2-month period is 25. Assume that demand is described by a normal distribution. (3 + 3 + 4 + 8 + 12 + 20 = 50 points)

What is the optimal order quantity?

What will be the average time between transactions?

How much safety stock should be maintained for 98% cycle service level?

What should be the reorder point for 98% fill rate?

Now suppose that the English company is ready to send the mustard by a faster ship, which will reduce the replenishment lead time to 1-month and the standard deviation of demand during that period to 17.7, but increase the cost to $15 per jar. What will be the new reorder point for 98% fill rate and 98% cycle service level?

What will be the optimal total inventory cost (Ordering + Holding + Purchase) before and after the decrease of lead time (and resultant price increase)? What managerial insights can you get from this?

Reference no: EM132127596

Questions Cloud

What was the effect on the uk growth rate : Several times in the last century, the UK decided to set the value of the £ above its equilibrium value. In terms of the Mundell-Fleming model.

Candidate from these two groups and employing organization : What are the benefits to the job candidate from these two groups and the employing organization?

What effect do you think that had on the german economy : Over the next decade, the Dmark appreciated very rapidly relative to the dollar, reaching a value of DM1.8 by 1979.

Explain what happened to the growth rate : In 1961, Charles de Gaulle decided he did not want the French franc to be considered as a second-rate currency, so he chopped two zeros off the value.

What will be the average time between transactions : What is the optimal order quantity? What will be the average time between transactions?

People share their information between apps and services : How Should Facebook and Other Companies Protect Privacy While Letting People Share Their Information Between Apps and Services?

Why did the dollar remain strong : The US economy slowed down sharply in the latter half of 2000, and the actual recession started early in 2001. Monetary policy eased sharply throughout 2001.

Analyze how might pursue low-cost-differentiation strategy : Analyze how it might pursue (a) a low-cost or (b) a differentiation strategy.

How the changes in the economy would affect the value : Using the IS/LM and NFI/NX diagrams, show how the following changes in the economy would affect the value of the dollar and the net export balance.

User Account

All Pages