Inventory Control Models Due December 4th Homework Assignment Inventory Control Models MGMT E-5065 Operations and Logistics Management

Operations and Logistics The Toy Manufacturer MGMT E-5065 Operations and Logistics Management Problem 1 A toy manufacturer uses forty eight thousand ( 48,000 ) wheels per year for its popular dump truck series. The firm makes its own wheels which it can produce at a rate of eight hundred ( 800 ) per day. The toy trucks are assembled uniformly over the entire year. Carrying cost is one dollar ( $1.00 ) per wheel a year. Setup cost for a production run of wheels is forty five dollars ( $45.00 ). The firm operates two hundred and forty ( 240 ) days per year.

The Toy Manufacturer REQUIREMENT Manually compute the optimal production run size. Manually compute the total variable costs ( TVC ) for the above production run size. C. Manually compute the length of the production run period.

Office Supply Distributor A firm buys a projector bulb at the rate of ten ( 10 ) per week. The price charged by the manufacturer varies with the order quantity as follows: Order Quantity Unit Price 0 - 99 $200.00 100 - 249 $180.00 250 - 499 $150.00 500 or more $130.00 Problem 2 The firm estimates that it pays one hundred dollars ( $100.00 ) for each order of bulbs. It also believes that it costs eighteen percent ( 18% ) per year of a bulb’s unit price to hold it in inventory.

Office Supply Distributor REQUIREMENT A. Determine the most cost-effective number of bulbs to order at one time. B. Compute the TC ( total costs ) for such an ordering policy as well as the candidate ordering policies. NOTE: Assume a fifty-two ( 52 ) week year.

ABC Company Problem 3 ABC Company is the exclusive North American distributor of a portable sauna manufactured in Sweden. The saunas cost the company two-thousand four-hundred dollars each ( $2,400.00 ) , and the company estimates the annual carry cost per unit for this product is five-hundred and twenty-five dollars ( $525.00 ) . Because the saunas must be shipped in a containerized vessel, the fixed ordering cost is fairly high at one-thousand two-hundred and fifty dollars ( $1,250.00 ) . Lead time for delivery is four ( 4 ) weeks. ABC Company receives orders for an average of fifteen ( 15 ) saunas per week. Customers are willing to place orders for the saunas when ABC is out of stock. However, the firm estimates the cost of keeping a customer’s sauna on backorder is $1,040.00 one thousand and and forty dollars per year.

ABC Company REQUIREMENT Determine the optimal order quantity ( Q* ) for the saunas. Determine the optimal number of backorders ( S* ) . Determine the reorder point ( ROP / R ) for the optimal order quantity. Note: The firm operates fifty-two ( 52 ) weeks a year.

The Retailer Problem 4 A retailer buys a certain item from a distant supplier. Lead time ( L ) is normally distributed with a mean of thirty days ( µ = 30 ) and a standard deviation of fourteen days ( σ = 14 ). Daily demand is also normally distributed with a mean of four items ( µ = 4 ) and a standard deviation of one and one-half items ( σ = 1.5 ) .

The Retailer REQUIREMENT Determine the safety stock and reorder point for an eighty-five percent (85%) service level, that is, a 15% risk of a stockout. B. Determine the safety stock and reorder point for a ninety-five percent (95%) service level, that is, a 5% risk of a stockout.

XYZ Company Problem 5 XYZ Company buys a component from a distant vendor seven (7) times a year. It takes an average of ten (10) days to receive an order from the time it is placed. The units cost three dollars ( $3.00 ) each and have a carry cost of seventy-five cents ( $.75 ). The firm estimates a stockout cost of one dollar ( $1.00 ) per unit. The probability distribution of demand during a ten ( 10 ) day period is as follows: Demand 144 152 160 168 176 184 192 Probability .01 .04 .20 .50

XYZ Company REQUIREMENT Calculate the safety stocks ( SS ) for reorder points 168 and 176 ( units ). Calculate the additional annual carry costs ( H ) for the reorder points 168 and 176 ( units ). 3. Calculate the annual expected stockout costs ( Cs ) for the reorder points 168 and 176.

Inventory Control Models Homework Assignment Inventory Control Models MGMT E-5065 Operations and Logistics Management