Annual demand for a certain product is 8,000 units and has a standard deviation of 1,750 units. What is the average demand and standard deviation during the lead time period if the lead time is 4 days? 1 week? 1 month?
2. Demand for one specific tablet at Best Buy is 1,000 units per month. Best Buy incurs a fixed order placement, transportation, and receiving cost of $4,000 each time an order is placed with their supplier for the tablet. Each tablet costs $500 and Best Buy has a holding cost (carrying cost) of 20%.
a. Determine the size of the order for this tablet that the inventory manager of the store should placein each replenishment order if he was following an EOQ inventory policy.
b. What is the average cycle inventory in the store?
c. How often can the store expect to order this item?
d. How many orders each year can the store expect to make for this tablet?
e. What is the total annual cost of following the EOQ inventory policy?
3. For question number 1, the store wants to ensure an in-stock percentage of 92%. It has gone back and looked at its demand, and has determined that the standard deviation of demand (monthly) is 200 units. What reorder point should the store set for the tablet if the lead time to receive the order once it is placed is 2 weeks?
4. Jack and Diane were in the same student group while studying for their undergrad in supply chain management at VCU. They graduated together but started working as inventory managers in different but competing retailers selling air conditioners in Richmond. While in school, they learned only the economic order quantity model for finding the optimal order sizes. Now they are both purchasing air conditioners from Trane to sell at their stores. Jack knows that the order setup cost with Trane is $200 and the annual inventory holding cost is $400 per unit (V times W). Jack expects that Diane has the same cost figures. Jack has accidentally learned from his salesperson that Diane is ordering 10 air conditions every time she orders. Use this information to deduce the demand Diane faces. Briefly explain why competitors would want to know each other's demand in a real world environment.
5. Weekly demand for Legos at the local Target is normally distributed, with a mean of 2,500 boxes and standard deviation of 500 boxes. The replenishment lead time is 2 weeks. Determine the safety stock that the store should carry to achieve a customer service level of 80%, 90%, 95%, 97.5%, and 99%.
6. Dell Computer maintains a stock of spare parts for the entire country at one warehouse in Austin, Texas. To provide improved customer service, the company will expand the number of warehouses to 10, and they will be of equal size. The total inventory investment in the current warehouse is $5,000,000/
a. Using the square-root rule, estimate the amount of inventory investment that the distribution system is likely to contain in 10 warehouses.
b. Suppose that nine warehouses are operating with $1,000,000 of inventory investment in each. If the company were consolidate the inventory into 3 equal-size warehouses, how much inventory would be in each of them?