Compute the reorder point, Operation Management

Assignment Help:

The Norwitch Company uses a continuous review (s, Q) system for inventory control.  Weekly demand for an item, Pressure Valve #5 (PV5), is distributed Normally with a mean and standard deviation of 20 and 10 respectively.  Norwitch uses an order quantity of 200 units for PV5 and its supplier takes 5 weeks to fill an order.  Each unit of PV5 costs $50 and carrying charges are $0.20/$/yr.  Norwitch uses a 99% fill rate as a target service measure.

(a) Compute the reorder point, s, that will satisfy Norwitch's target fill rate.  What is the likelihood that Norwitch has stocked out of PV5 when a new shipment arrives from its supplier?
 
 (b) Suppose Norwitch has worked out a new contract, accepted by all its customers, of being allowed up to one week to satisfy each demand.  Norwitch still uses a 99% "fill rate" as a target service measure.  However, stockouts satisfied within a week is considered as good as demand satisfied from the on-hand inventory.  
 
How would you modify the logic of computing the re-order point, s, to take account of the one-week grace period?  Sketch the average behavior of the (s,Q) system to illustrate your reasoning.
 
(c) Compute the reorder point for the new contract.  What is the safety stock?  On an average, how much inventory Norwitch has on hand when a new shipment of PV5 arrives?  
 
(d) Estimate the annual cost savings due to the one-week grace period.

(e) What will be the impact of one-week grace period on Norwitch's customers? Should Norwitch and its customers make the inventory status of PV5 known to each other?   What good will that do?


Related Discussions:- Compute the reorder point

Explain the industry life cycle affect business strategy, How does the indu...

How does the industry life cycle affect business strategy? Detail your answer based on each stage: introduction, growth, maturity, and decline. (Please provide example(s) were appl

Factor rating method, East Coast Manufacturing, Inc. plans to locate a new ...

East Coast Manufacturing, Inc. plans to locate a new production facility in Hartford, Philadelphia, or Baltimore.  Six location factors are important:  cost per product unit, labor

Which class might have the major impact on the workforce, Determine which c...

Determine which class protected by Title VII of the Civil Rights Act of 1964 had the greatest impact on the workforce of the 20th century. Next, determine which class might have th

Performance prism - performance and productivity measures, Performance Pris...

Performance Prism - Performance and Productivity Measures Neely and Adams (2000) argue that in their recent research managers and academics highlight the need for a fresh pers

Describe an issue involving mortgage foreclosures, Discusses an issue invol...

Discusses an issue involving mortgage foreclosures in your state and write a summary

Forecasting, what are the different steps in quantitative forecasting in ma...

what are the different steps in quantitative forecasting in manufacturing

Explain what changes should be made in the wage, A father decides to put hi...

A father decides to put his two sons to work landscaping. The business involved going to a customer's home and providing landscaping services (cut gras, edge sidewalk, pull weeds i

Explain important part of strategic training, Why is evaluating training an...

Why is evaluating training an important part of strategic training?

Explain ethernet network with a fddi network, A bridge that is used to conn...

A bridge that is used to connect an Ethernet network with a FDDI network must be practicing what type of bridging?

Describe objective functions for an lp model equivalent, Are the following ...

Are the following objective functions for an LP model equivalent? That is, if they are both used, one at a time, to solve a problem with exactly the same constraints, will the opti

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd