Practical Operations Management
2nd Edition
ISBN: 9781939297136
Author: Simpson
Publisher: HERCHER PUBLISHING,INCORPORATED
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Chapter 10, Problem 7P
Summary Introduction
Interpretation: Impact on reorder point when lead time increases from 5 to 10 days is to be ascertained.
Concept Introduction: Reorder point is the minimum level of inventory or stock which indicates a firm to restock its inventory. It is an indicator for a firm to restore its stock.
Stock out risk is the risk of having no item in the inventory when demand increases.
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Explain INVENTORY PLANNING AND ACCURACY?
The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days.
If the order size was 1,000 kilograms of resin, what would be the average inventory level?
Company B sold 50% of the 5,000 items that it carried last week. There were 500 items for which some demand was not satisfied.
What is the stockout probability for last week?
A) 10%
B) 50%
C) 85%
D) 28%
Chapter 10 Solutions
Practical Operations Management
Ch. 10 - Prob. 1DQCh. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4P
Ch. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - Prob. 17PCh. 10 - Prob. 18PCh. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - Prob. 23PCh. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26PCh. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Prob. 29PCh. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Prob. 2.1QCh. 10 - Prob. 2.2QCh. 10 - Prob. 2.3QCh. 10 - Prob. 2.4QCh. 10 - Prob. 3.1QCh. 10 - Prob. 3.2QCh. 10 - Prob. 3.3QCh. 10 - Prob. 3.4Q
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- The chapter presented various approaches for the control of inventory investment. Discuss three additional approaches not included that might involve supply chain managers.arrow_forwardCompare and contrast the fixed quantity version of EOQ with the fixed interval version. In which situations would each be used?arrow_forwardHow are the reorder point and lead time related in inventory analysis?arrow_forward
- Discuss some of the issues that a small pizza restaurant might face in inventory management. Would a pizza restaurant use a fixed order quantity or period system for fresh dough (purchased from a bakery on contract)? What would be the advantages and disadvantages of each in this situation?arrow_forwardLead time for one of your fastest-moving products is21 days. Demand during this period averages 100 units per day.a) What would be an appropriate reorder point?b) How does your answer change if demand during lead timedoubles?c) How does your answer change if demand during lead timedrops in half?arrow_forward3. If the lead time is four days and the daily demand is 25, what is the reorder point?arrow_forward
- Walrus Company has the following information available concerning one of its inventory items: Cost of placing an order $30.00 Unit carrying cost per year $3.00 Annual unit demand 6,625 Safety stock 125 Average daily demand 25 Normal lead time in days 10 If there is a delay in shipping the item, approximately how many days can be covered by the safety stock? a.5 days b.110 days c.26 days d.31 daysarrow_forwardThe retail shop averages demand of 100 chocolate chip cookies per day, with a 10 cookie standard deviation. Based on the previous chocolate chip production, lead time for reorder is 3 days (0 standard deviation) since there is no shipping involved. Management would like to ensure a 90% service level for its customers. Use Excel template to calculate the reorder point (ROP)arrow_forwardA regional supermarket is open 360 days a year. Daily use of cash register tapes is 15 rolls. The purchase price of the tape is $ 2 and inventory carrying cost is 60 cents per roll a year. Ordering cost is $ 20 per order. The order replenishment lead time is 7 days. What is the Order Point (re-order point) assuming demand is known and constant?arrow_forward
- Why do we use "Specifications or bill of material" in the dependent inventory model?arrow_forwardAt the EOQ, what is the firm’s total inventory cost per year, assuming safety stock = 15 units?arrow_forward10 Use the information presented in the graph to answer the following questions: Annual Cost C3 C2 Q1 You are also given the following information: Q1 =450 .Q2 = 700 C1 = 350 C2 = 750 1300 Q2 Order Quantity Which annual inventory cost component does the blue line represent? Total cost Which annual inventory cost component does the green line represent? Holding cost What is the Economic Order Quantity (EQ9) based on th Which annual inventory cost component does the red line represent? Ordering cost 220arrow_forward
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