Using time-phased plan for component inventories

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1. By using a time-phased plan for component inventories, a firm can reduce average inventory levels from 105 units to 42.5 units. If the average component value is Rs.12 and the reduction applies to 4,000 components, how much of a saving would result? Use inventory-carrying costs of 30 per cent per year.

2. Annual demand for a product is 13,000 units; weekly demand is 250 units with a standard deviation of 40 units. The cost of placing an order is $100, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.65 per unit. To provide a 98 percent service probability, what must the reorder point be? Suppose the production manager is told to reduce the safety stock of this item by 100units. If this is done, what will the new service probability be?

Reference no: EM132205235

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