Wide variety of gourmet foods and cooking supplies

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Reference no: EM132304905

Problem. Order-Up-To Model

A local specialty food store carries a wide variety of gourmet foods and cooking supplies. One of the things they are particularly known for is their wide variety of cheeses from around the world. Dave, the manager of the cheese department, is trying to determine the best way to manage the department’s inventory. As a starting point, he has decided to analyze this problem for Manchego, a popular Spanish cheese.

At the beginning of each week Dave can place an order for any cheese that he stocks. Based on past history, he has determined that average weekly demand for Manchego cheese is about 30 pounds, with a standard deviation of 5 pounds. Demand in a given week is approximately Normally distributed. Replenishment lead time (L) is 2 weeks, i.e., effective lead time (L+1) is 3 weeks.

When stock out happens, the cheese is backordered. Dave determines the critical ratio at 90%.

a) The critical ratio determined by Dave implies that ____ % of the customer demand will be backordered. (0.2 points)

b) The safety stock = _____ .

Please show detailed analysis below (Round your answer to the nearest integer):

c) The order-up-to level S = ________________ .

Please show detailed analysis below (Round your answer to the nearest integer):

d) If at the beginning of a week, Dave observes 50 pounds of Manchego cheese in store, and there are 30 pounds of Manchego cheese in the pipeline. Should Dave order more? If yes, how many should Dave order? If no, explain why.

e) If at the beginning of a week, Dave observes 80 pounds of Manchego cheese in store, and there are 25 pounds of Manchego cheese in transit. Should Dave order more? If yes, how many should Dave order? If no, explain why.

Reference no: EM132304905

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