See the following data on baby blanket inventory

Assignment Help Management Theories

Reference no: EM13382789

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: EM13382789

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