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

Process Planning, Process Planning In the design of processes there is...

Process Planning In the design of processes there is a certain similarity to the design of products, in that there is a hierarchy of design stages. At the top level, process

Explain what is your assessment of the health of the project, On day 51, a ...

On day 51, a project has an earned value of $600, an actual cost of $650, and a planned cost of $560. Compute the SV, CV, and CPI for the project. What is your assessment of the he

Behaviour while a person ethic is somewhat questionable, Which of the follo...

Which of the following statement is correct/1. Deep acting and surface acting are two terms reflecting ways of behaviour when a person ethic is somewhat questionable/2. Deep acting

Describe the difference among rationalist and incrementalist, Explain the d...

Explain the difference between rationalist and incrementalist strategy. Who are the main protagonists of the theories? How have the debates regarding these theories had implication

How business affected the make-or-buy decision, How has the increase in unc...

How has the increase in uncertainty in business affected the "make-or-buy" decision, and is this trend likely to change?

Explain managerial motivation, Explain managerial motivation. Manageri...

Explain managerial motivation. Managerial Motivation: It is the means or inducements, which impel or inspire a person to intensify his willingness to use his abilities and po

Explain marketplace and demonstrate its effectiveness, Access how technolog...

Access how technology and the changing demands of customers have impacted the movie business. Suggest a strategy for Netflix's to prevent a new entrant into the marketplace and dem

Explain different steps of the supply process, When concerned with project ...

When concerned with project procurement management regarding a project, list the different steps of the supply process and reasons why or why not the project would have been more s

Explain reduce time in calculating customers, New software has been purchas...

New software has been purchased to reduce time in calculating customers' accounts. Establishing report and effective communication with team members is primary importance to make t

Explain health care information systems, 1. Analyze the basic technology un...

1. Analyze the basic technology underlying health care information systems and determine the most pressing need for innovation. 2. Explain (with specific examples using local hospi

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