Can I have the full steps please? Managing Uncertainty in supply chain: Q3) The
ID: 366336 • Letter: C
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Can I have the full steps please?
Managing Uncertainty in supply chain: Q3) The Hastings Company is a nation-wide wholesaler for small electronic devices. One of its most popular items is a new GPS unit called the WAMI-1000. Hastings has gathered the following information, and has asked you to develop a continuous review inventory control system for this item: (20 points) 50,000 units Order quantity for each order placed with manufacturer Average demand = 5,000 units/week Standard deviation of weekly demand = 1,000 units Average lead time = 4 weeks Standard deviation of lead time 1 weck Cycle-service level = 90% (z for 90% = 1.28) a. What is the standard deviation of demand during lead time? b. What is the safety stock level that should be carried for the WAMI-1000? c. What is the reorder point for the WAMI-1000? d. Summarize the actions Hastings should take using your new inventory system. 2.33), e. If Hastings decides to increase its cycle-service level to from 90% to 99% (z for 99% how does this change the actions that should be taken?Explanation / Answer
Ansss...
a) Standard deviation of demand during lead time [sigma _{LTD}=sqrt{L}sigma _{R}]
L = Lead time = 4 week
[sigma _{R}] = Standard deviation of weekly demand = 1000 units
Therefore [sigma _{LTD}] = [sqrt{4*}1000] = 2000
b) Safety Stock level = [z*sigma _{LTD}]
Z for 90% service level = 1.28
Safety stock = 1.28 *2000 =2560Units
c). Reorder point R= [ar{d}L + safety stock]
[ar{d}] = average demand
R= 5000*4 + 2560 = 12560 Units
d). To use the new inventory system hastings should fix the safety stock at = 2560 units and reorder point at = 12560 units
e). If service level is increased from 90% to 99%
Safety Stock level = [z*sigma _{LTD}] = 2.33*2000 = 4660 units
R= [ar{d}L + safety stock] = 5000*4+4660 = 14660 units
Therefore the holding cost as well as the space required would get increased in this case.
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