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 service quality addresses, 1. Can some please help me with these f...

1. Can some please help me with these fill in's? I am not sure I have the right answers One Way to identidy goals is to identify best practices through a process known as________

Explain what exactly is stress, What exactly is stress? What is the differe...

What exactly is stress? What is the difference between so-called "good" stress or so-called "bad" stress? When it comes to dealing with the stress, does it make any difference whet

Industrial society - operations function, Industrial Society - Operations F...

Industrial Society - Operations Function In the industrial society, estimated during the period of growth of industrialisation roughly 1820-1920, machines and the production o

Explain what problems does diversity present, Individual diversity is an im...

Individual diversity is an important concept in organizational behaviour. People can be described by a number of categories that are both inherent (e.g., age, race, gender, ethnici

Application of operations research, application of operations research in m...

application of operations research in managerial decision making

How examine his deposit box, Several weeks after a depositor's death, Chase...

Several weeks after a depositor's death, Chase Manhattan Bank paid 12 checks on the deceased depositor's account. The depositor's signature on the checks had been forged. The estat

Line balancing, what happens if line balance doesnt exist?

what happens if line balance doesnt exist?

International merketing, . Define international marketing and furnish its f...

. Define international marketing and furnish its features

Explain what is the utilization rate of this service system, "Fast Eddie" F...

"Fast Eddie" Flournoy manages the service equipment division of Delta Airline's Atlanta terminal. He keeps a service crew on call to repair tow tractors that break down. Tractors b

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