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

Simultaneous motion cycle, Simultaneous Motion Cycle: It is sometimes ...

Simultaneous Motion Cycle: It is sometimes  required  to record in  minute  detail the  simultaneous  movement    of the different    parts of  the body  of an  operator  duri

Explain career progression of individual, Explain career progression of ind...

Explain career progression of individual and performance appraisal. Performance Appraisal and Individual's Career Progressio: Performance appraisals assist in unearthing

Assignment 2000 words, Assignment EITHER A. Practical application of concep...

Assignment EITHER A. Practical application of concepts in a local organisation • You are required to analyse and evaluate a key aspect of operations management covered in this subj

Order winning and order qualifying criteria, 1. What you think might be the...

1. What you think might be the order winning and order qualifying criteria for: McDonald's, Southwest Airlines and a university?  Answer:

Determine the effect of facility layout of an organisation, What effect doe...

What effect does your organisation's facility layout have on the following (where appropriate): inter-process movement; health & safety; congestion; resource utilisation; work-in-p

What are the pros and cons of cumulative voting, Discuss the pros and cons ...

Discuss the pros and cons of cumulative voting vice regular voting for Directors of a company. Why would a company choose one over the other? Who benefits from each type: sharehold

Explain health care compensation practices, Health Care Compensation Practi...

Health Care Compensation Practices Please respond to the following- • Analyze the pros and cons of the different health care compensation approaches and philosophies and determi

Explain company is operating at full capacity, Develop a decision tree for ...

Develop a decision tree for the case of a company is operating at full capacity and with product demand rising. The choice is between new equipment and overtime. A 20% rise in sale

Explain about leadership styles, Question: (a) Write short notes on any...

Question: (a) Write short notes on any five leadership theories and on any three main leadership styles. (b) Your friend has just been appointed team leader at his place o

Linear Programming, Solve the following Linear Programming Problem using Si...

Solve the following Linear Programming Problem using Simple method. Maximize Z= 3x1 + 2X2 Subject to the constraints: X1+ X2 = 4 X1+ X2 = 2 X1, X2 = 0

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