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

World competitive merit for the manufacturing of goods, The regime in China...

The regime in China has been known to manipulate it currency creating a competitive a world competitive advantage for the manufacturing of goods. Evaluate the impact to the U.S. ma

Explain expected learning curve, A time standard was set as 0.20 hour per u...

A time standard was set as 0.20 hour per unit based on the 50th unit produced. If the task has a 90 percent learning curve, what would be the expected time of the 100th, 200th, and

Explain how this can affect people''s sense of responsibility, In the morde...

In the mordern world most people work in organisations. Describe how this can affect people's sense of responsibility and the morality of their conduct.

Explain human relations movement, Compare and contrast Scientific Managemen...

Compare and contrast Scientific Management and the Human Relations Movement

Find average time agent work for a call center, A call center employs 1,000...

A call center employs 1,000 agents. Every month 50 employees leave the company and 50 new employees are hired. How long does the average agent work for this call center?

Different approaches to innovation discussed organizations, Analyze the dif...

Analyze the different approaches to innovation discussed in this chapter to determine which approach you think would be the greatest value to the greatest number of organizations.

Logical process modeling, What is logical process modeling? What is physica...

What is logical process modeling? What is physical modeling?

Explain what are the issues of management, What are the issues of managemen...

What are the issues of management does the Rhino Capture in Kruger National Park face and how are they analysed and evaluated?

Decision making process, You have been asked to undertake a management acco...

You have been asked to undertake a management accounting review of an activity, a service or an event, which has occurred or is to occur in either your area of work or in an area o

Explain which event was the labor productivity higher, A catering company p...

A catering company prepared and served 300 meals at an anniversary celebration last week using eight workers. The week before, six workers prepared and served 20 meals at a weedin

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