## (solution) 1. A retailer estimates that for next week, the demand for one product has mean as 1000 units, and t

1. A retailer estimates that for next week, the demand for one product has mean as 1000 units, and the standard deviation is 200 units. The revenue from each unit is \$10. the purchasing cost is \$4 per unit. The salvage value for each unsold product is \$3, while the penalty cost is \$5. What is the best stocking point in the next week? 2. A product is stocked in two warehouses. In warehouse 1, d1=200 with sd as 50 units per month, the lead time Lt1=9.5 months. In warehouse 2, d2=150 and sd as 35 units per month, the lead time is LT2=0.75 months. The product value is \$75. The replenishment ordering cost is \$500 for both warehouses and inventory carrying cost is 1.5% per month. Service level is set to 95% for both warehouses. The manager is considering combining these two warehouses into one. He wants to figure out the potential savings from doing so. Let us assume that after consolidation, the new warehouse faces combined demand from the two original warehouses, the lead time for the new warehouse is 1 month. the new ordering cost is \$600 and the new inventory carrying cost is 1.2% per months. the service level is still set at 95%

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Sep 13, 2020

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