ISE 216 Question Hour Chapter 5

1. ISE 216QuestionHourChapter 5 Mar. 30th 2011

2. Q 5.10 HappyHenry’s car dealer sells an imported car calledthe EX123. onceeverythreemonths, a shipment of thecars is madetoHappyHenry’s. Emergencyshipments can be madebetweenthesethree-monthintervalstoresupplythecarswheninventoryfallsshort of demand. Theemergencyshipmentsrequiretwoweeks, andbuyersarewillingtowaitthislongforthecars, but willgenerallygoelsewherebeforethenextthreemonthshipment is due. Fromexperience, it appearsthatthedemandfor EX123 over a three-monthinterval is normallydistributedwithmean of 60 and a variance of 36. thecost of holding an EX123 foroneyear is $500. emergencyshipmentscost $250 per car overandabove normal shippingcost. • Howmanycarsshouldthey be purchasingeverythreemonths? • Repeatthecalculations, assumingthatexcessdemandarebackordered form onethree-monthperiodtothenext. Assume a loss-of-goodwillcost of $100 forcustomershavingtowaituntilthenextthree-monthperiodandacost of $50 percustomerforbookkeepingexpenses. • Repeatthecalculations, assumingthat H. H. İs out of stock. Thecustomerwillpurchasethe car elsewhere. Inthiscaseassumethatthe car cost H. H. an average of $10000 andsellfor an average of $13500. ıgnoreloss-of-goodwillcosts.

3. A 5.10

4. Q 5.13 An automotivewarehousestocks a variety of partsthataresold at theneighborhoodstores. Oneparticularpart, a popular brand of ailfilter, is purchasedbythewarehousefor $1.5 each. It is estimatedthatthecost of orderprocessingandreceipt is $100 perorder. Thecompanyuses an inventorycarryingchargebased on a 28 percentannualinterest rate. Themothlydemandforthefilterfolows a normal distributionwithmean 280 and a standart deviation 77. orderlead time is assumedto be fivemonths. Assumethat a filter is demandedwhenthewarehouse is out of stock, thenthedemand is backordered, andthecostassesedforeachbackordereddemand is $12.80. Determinethefollowingquantities: • The optimal values of theorderquantityandthereorderlevel. • Theaverageannualcost of holding, set up, andstockoutassociatedwiththisitemassumingthat an optimal policy is used. • Evaluatethecost of uncertaintyforthisprocess. That is, comparetheaverageannualcostyouobtained in part b withtheaverageannualcostthatwould be incurredifthelead time demand had zerovariance.

5. A 5.13

6. A 5.13

7. Q 5.14 Weiss’s Paint Store uses a (Q,R) inventory system to control its stock levels. For a particularly popular light latex paint, historical data show that the distribution o monthly demand is approximately normal, with mean 28 and standard deviation 8. replenishment lead time for this paint is about 14 weeks. Each can of paint costs the store $6. although excess demands are back-ordered, the store owner estimates that unfilled demands cost about $10 each in bookkeeping and loss-of-goodwill costs. Fixed costs of replenishment are $15 per order, and holding costs are based on a $30 percent annual rate of interest. • What are the optimal lot sizes and reorder point for this bramd of paint? • What is the optimal safety stock for this paint?

8. A 5.14

9. Q 5.15 After taking a production seminar, the owner of Weiss’s Paint Store mentioned in Problem 14, decides that his stock out cost of $10 may not be very accurate and switches to a service level model. He decides to set his lot size by the EOQ formula and determines his reorder point so that there is no stock-out in 90 percent of the order cycles. • Find the resulting (Q,R) values. • Suppose that unfortunately, he really wanted to satisfy 90 percent of his demands (that is, achieve a 90 percent fill rate). What fill rate did he actually achieve from the policy determined in part (a)?

10. A 5.15