Compute the reorder point, Operation Management

Assignment Help:

The Norwitch Company uses a continuous review (s, Q) system for inventory control.  Weekly demand for an item, Pressure Valve #5 (PV5), is distributed Normally with a mean and standard deviation of 20 and 10 respectively.  Norwitch uses an order quantity of 200 units for PV5 and its supplier takes 5 weeks to fill an order.  Each unit of PV5 costs $50 and carrying charges are $0.20/$/yr.  Norwitch uses a 99% fill rate as a target service measure.

(a) Compute the reorder point, s, that will satisfy Norwitch's target fill rate.  What is the likelihood that Norwitch has stocked out of PV5 when a new shipment arrives from its supplier?
 
 (b) Suppose Norwitch has worked out a new contract, accepted by all its customers, of being allowed up to one week to satisfy each demand.  Norwitch still uses a 99% "fill rate" as a target service measure.  However, stockouts satisfied within a week is considered as good as demand satisfied from the on-hand inventory.  
 
How would you modify the logic of computing the re-order point, s, to take account of the one-week grace period?  Sketch the average behavior of the (s,Q) system to illustrate your reasoning.
 
(c) Compute the reorder point for the new contract.  What is the safety stock?  On an average, how much inventory Norwitch has on hand when a new shipment of PV5 arrives?  
 
(d) Estimate the annual cost savings due to the one-week grace period.

(e) What will be the impact of one-week grace period on Norwitch's customers? Should Norwitch and its customers make the inventory status of PV5 known to each other?   What good will that do?


Related Discussions:- Compute the reorder point

Operational Management, I have a take home exam that I need to be solved 10...

I have a take home exam that I need to be solved 100 % correct , please . I need it within 23 hours EXACTLY from now please . Thank you so much and I am really looking forward to s

Explain purchase the motors for the appliance, A firm plans to begin produc...

A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor for $7 each or to produce them in-

Compute the schedule variance or cost performance index, A project to build...

A project to build a new bridge seems to be going very well since the project is well ahead of schedule and costs seem to be running very low. A major milestone has been reached wh

Illustrate the strategic positioning tools, Illustrate the strategic positi...

Illustrate the strategic positioning tools? Strategic positioning tools according to Reck and Long: • Passive (as clerical and transaction based) purchasing functions only o

Explain what order quantity will enable the refinery, A refinery in Houston...

A refinery in Houston replaces all of the 3" full-open ball valves in its facility according to a very strict maintenance policy which spaces replacements fairly uniformly througho

Explain average performance of the system, Refer to the results from the Si...

Refer to the results from the SimQuick simulation model below to answer the following 5 multiple-choice questions. You will see that the results are similar to the two-teller, bank

Make a fictional company and develop a memo to communicate, Create a fictio...

Create a fictional company and develop a memo to communicate the importance of a business continuity plan to the board of directors. The completed assignment should be at least 25

Why the company operates an average of 20 days a month, A food processor us...

A food processor uses approximately 29,730 glass jars a month for its fruit juice product. Because of storage limitations, a lot size of 4,000 jars has been used. Monthly holding c

Discuss what responsibility businesses towards environment, Environment Ple...

Environment Please respond to the following: •From the video, take a position on the ethical aspects of the logging industry on the local economies and the environment in the North

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd