Problem on fixed-time period model

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Reference no: EM13219951

See the following data on baby blanket inventory planning :

                        Demand = 60 blankets/week

                        Delivery lead time = 2 weeks (delivery of blankets, not the babies!)

                        Annual holding cost per unit = 25% of item cost

                        Ordering cost = $10.00/order

                        Cost of one blanket = $8.00

                        Standard deviation in weekly demand = 5 blankets

                        Standard deviation in 2 week demand = 7 blankets

                        Standard deviation in 3 week demand = 8.7 blankets

                        Standard deviation in 4 week demand = 10 blankets

                        Standard deviation in 5 week demand = 11.2 blankets

                        Desired cycle service level = 96%

                        The hospital is open 52 weeks per year.

a) What is the economic order quantity (EOQ) for baby blankets? Blankets are currently ordered in quantities of 250.  How much would the maternity ward save in total annual costs by changing to the EOQ?

b) What is the difference in safety stock quantities if blankets are managed using a fixed-time period model (P model) versus a Fixed-order quantity (Q model)?

     Table:  Normal Demand Percentages

677_safety stock quantities.png

Reference no: EM13219951

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