Operations Management

Operations Management

Assignment 7: Inventory Control
I would like like the solution “step by step”
 

The manager of a construction firm has determined from historical records that demand for cement averages 5 tons per week with a standard deviation of 3 tons. The supply lead time is 4 weeks. The cost of a ton of cement is $100 and inventory carrying cost is estimated at an annual rate of 30%. The cost of placing an order is $96.

 [Assume 50 weeks in a year.]

 

Compute the following:

 

a.      
Economic order quantity

 

b.     
Number of orders per year

 

c.      
Cycle length (i.e., number of weeks between consecutive orders)

 

d.     
Average inventory level

 

e.     
Total annual cost of ordering + inventory carrying

 

f.       
Compute the reorder point and the corresponding safety stock for each of the following service levels:

 

                                  i.           
90%

 

                                 ii.           
95%

 

                               iii.           
99%

 

                               iv.           
99.9%

 

                     v.       99.99%