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 monetary cost a training project, Operations managers will always w...

Operations managers will always want to know the monetary cost a training project will be. Stating the intrinsic value is important as part of the return, but how would it make or

Describe how it relates to this week''s topic, • This assignment is to take...

• This assignment is to take into consideration doing business in China. You are an American company wanting to expand into China. Your management has asked you to do a PowerPoint

Explain what are the causes of the quality problems, 1. What are the causes...

1. What are the causes of the quality problems on the Greasex line? Display your answer on a fishbone diagram. 2. What general steps should Hank follow in setting up a continuou

LINE BALANCING, What do you understand by “line balancing”? What happens if...

What do you understand by “line balancing”? What happens if balance doesn’t exist?

Compute the probability that the unit will not last weeks, I am falling beh...

I am falling behind in my homework and need some help please. There are three short questions: 1) A computer has three main modules that have individual reliabilities of 0.77, 0.87

Drawbacks and challenges designing this job for efficiency, Consider the jo...

Consider the job of a customer service representative who fields telephone calls from customers of a retailer that sells online and through catalogs. What measures can an employer

Range - statistical aspects of variability, Range - Statistical Aspects of ...

Range - Statistical Aspects of Variability The range is simply the difference between the highest and lowest measurements recorded. Let us say that, in this case, the highest

Intermittent and continuous operations, Explain intermittent and continuous...

Explain intermittent and continuous operations. Under what type of situation it would be used in automobile industry?

Explain meeting organizational objectives, Write a 350- to 700-word paper t...

Write a 350- to 700-word paper that defines and compares and contrasts the following: • Innovation• Design• Creativity Describe the importance of the three items in meeting organiz

Explain implementation of tqm, Why is a system view so important to have if...

Why is a system view so important to have if you are going to implement TQM?

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