CHAPTER 19 jg34 (a) K=1S, N= Se, a= 30 = Gs [anos - SUGt tf: QYa = 1-83 months 2.32 : a) [eayeao iene) fee =sRe (2) pr3 => QM Adan ss 7 = {ae 3 aaa 0.30 D403. “oe = 1.41 menths x 14-3-2 ta) Keas,h= 005,402 600 = Q*. fargo VF4.60 yo eer + Qa = 129 weeks flaieeotas] LAROE - 744.22 05 S*. [Tales = P6509 ae Frost + Qa = sar weeks 193-2 a) Data Results 876 (aemandiyeary Raordar Port = $75 {setup cost) $500.00 (unit holding cost) 2.5 (lead time in cays} 365__(working daysiyear) Annual Setup Cost = Annuai Holding Cost = otal Variable Cost = Annual Total Holding Yatiable Cost Cost eT 5 $10,140 $1,500 $11,640 7 $7,243 $2,100 $9,343 8 $5,633 82,700 $8,333 1 $4,609 53,300 $7,309 13 $3,900 52,900 $7,800 15 $3,980 $4,500 $7,880 7 $2,982 $5,100 $8,062 19 $2,668 35,700 $8,368 21 $2,414 $6,300 $8,714 23 $2,204 $6,900 39,104 26 $2,028 $7,500 39,528° Data Results T= 876 _demandiyeat} Foorde Pont= 6.48 K= $75 (seiup cost) f= $800.00 (unit holding cost 3.5 (lead time in days} Annual Setup Cost = Annual Holding Cost 365 {werking daysvyear) Total Variable Cost $7,800 Decision 13 (order quanti Results (Gemandiyear) {setup cost} {unis holding cost) {load time in days) {working days’yeat) ecrder Point = Annual Setup Cos Annual Holding Cost Tota: Variable Cost= $7,800, G= 13 torder quantiyy The results are the same as those obtained in past c). KD _ 275676) e) ge= [PRR . j205X676) _ | as = 0.2;3000) 713 computers purchased with each order 4 Number of orders per year = 2 = S26 52 13 L 2 8) The optimal policy reduces the total variable inventory cost by $3,840 per year, which is a 33% reduction. ROP = XLT) = asi = 6.5 ~ inventory level when each order is placed sa b-4 a) Results (emandiyear) Reorder Point = (setup cost) (unit holding cost) (lead time in days) (working daysiyear) Annual Setup Cost Annual Kolding . etal Variable Cosi = _ $12,510.00] Decision, = 8500 (order quently)b> ‘Annual Anqual Total Setup Holding variable Months Cost Cost Tiesto + Bsco $510 $12,510 2 x70 $1,920 $7,020 @ 25500 $1,530 $5,530 4 34000 $2,040 $5,040 S 42500 $2,550 $4,950 € 51000 $3,980 $5,060 7 88500 $3,570 $5,284 & Be00D $4,980, $5,580 8 76500 $4520 $5,923 19 asoeo $5,100 $6,300 c Data Results D= 192009 [deranaiyear) Reorder Pont = a K= $1,000 (setup cost) he $0.12 {unit hotding cost) Annual Setup Cost= $2,473.86} L 0 (lead time in days) Annual Holding Cost = __ $2,473.86 WO = 365 (working daysiyear) Total Variable Cost = $4,947.73] Decision G=__1237 jorder quantiy) 4) Data Results D= 102000 jeemandiyeary Feorder Pant= 0 K= $1,000 (setup cost) n= $0.12 {unit holding cost) Annusat Satup Gost = $2,473.88 L= 9 fleas time in days) Annual Holding Cost = $2,473.86 WWD = 365 (working daysiyear) ola) Variable Cost = £4,947 73 Decision Gz arast _terder quantiyy ‘The results are the same as those obcained in part ¢). ©) oF 2 ae = 41,231 gallons purchased with each order 493-5 a) Data, Tose $20 $0.20 35 365 Temandryaar) (setup cost) (unit holding cost) (lead time in days) working daysivear) Decision 4-3 Rlosutts Recrcer Por 98.78 Annual Setup Cost = $144.22 Annual Hoding Cost = $144.22 Total Varablo Cos: = $208.44eo) Results Reorder Paint = Tdemandiyeart (setup cost) 33.75 anit holding cost) (lead time in days) (working daysiyear) Anoual Seup Cost= $122.90 Annual Holding Cost = $124.9¢ Total Variable Cost = $245.60 Decision 1665 ___(oreer quantiy The orsler quantity is increased by 223 LCDs, If the order quantity obtained in part a) is still used the TVC increases to $252.39, 2 Results Temandivea Reader Pan= 38.73 {setup cost) {unit noiding cost) ‘Annual Setup Cost = $161.25 {laad time in eays) Annual Holcing Cost'= $461.25 working caysiyear} Decision 1290 {order quantity) The order quantity is decreased by 152 LCDs, I the order quantity obtained in Part a) is still used the TVC increases to $324.49, a 4 =n una bowing Cost 1865.93, O18 o17 O19 0.21 0.23 0.25 sts $20 8934 aj Q* will decrease by half, bi Q* will double c) Q* remains the same. 49-1 a) (2KD 359-2750 = h which is 154% of the acquisition cost. b} Optimal Order Quantity h = 20% Data (demandrnanth) (setup cost (unit holding cost) {lead time in days) (working daysimartr a 48 (domanaawonthy (setup cost) (unit holding cost} (lead time in days) (working _days/monih) Decision, 30 (order quantlyy Setup Cost vh= ‘Optimal Order Quantity (Q} $25, d) Q* will double, ¢) Q* remains the same. => = $3 per month 2075150) 50 Results Feordar ont = $86.60 $26.60] 5173.21 Annual Setup Cost = Annual Holdng Cost =. “Total Variable Cost = Results earder Pont = 73) Annual Setup Cost $75.00 Annual Holging Cost = ___ $100.00] Total Variable Cost 5175.00 ©) Reorder point is 10 as shown in the above spreadsheet. dy ROP = i 5. (5 hammers x $4 holding cost). 2KD hk \a-5 = 10= J = =o 400 (sa; S*4 DLT) =-5 + (504, )- 5 hammers which adds $20 to his TVC ) = P=100 per year293-9 k= Djece, he@30, a= 8000, p= 5 (caessitaeasi [a fesoiliaten FRESE = 28,046 x, 2 de foe Tex(Boeeitia coe) = e578 S. [agape | re Qta 2 Fae months Resunis oe TaomaneToar a = $200. (setur cosh h $20 {unit holding cost) Annual Setup Cost = $2,449.49 t tad te in dey) Aanual Kling Cost = _§2/449.49 A (working daysivest Decision Osa oe aT b) Dota Results = 3000 aarnanaveay Wax Twentony Levers T8379 = $200 (setup cost) $20.09 (uni hotdng cost Anrual Setup Cost = $1,897.97 B= $30.09 _ {unit shortage cost) Anrual Holding Cost= $1,138.42 Annual Sronage Cost = $758.96] Decision Yotal Variable Cost = $3,794.73] as 316 (ordes quantity) S= 120 _tmaxmim shortage} 19.3 ap (Gemanayeary (setup cost) unit holding zest) (unit shortage cost, Wax Inventory Level = Annual Setup Cost = Annual Holdng Cost = Annual Shortage Cost Variable Cost = $3,903.8: (order quantiyy (maximum shoraze} This TVC is a reduction of $3900 or 50% from the TVC when shortages were not allowed. 14-6») Annual Annual = Anal =Total Setup Holding Shortage Variable Q Cost Cost Gost Cost Si850 41S $1,538 33,908 15, $3,360 $500 $2,657, $5,547 17 $2,982 $159 $2,353. $5494 19 $2,668 S16 $2,105, $4,789 24 $2,414 Sia $1,908, $4,333 2a | sz.eoe $117 srizan sage 25 $2,028 $300 $1,600 $3,928 27 | sije7s Sean staat sag0 29 | su7se 823, st.a7a ase a1 | 31935 sia $1120 gage? 33 | size suisse size 54.205 a5 | Sisco gii320 $tiaagecseo ©) Ancual Annual Anrusl =Total Soup Heking—Shorlage—Varabio 3 Cost Cost Cost Cost T1960 sais S38 Soa 10 31,850 ‘$2,954 $385, $5,288 12 31.080 $2,262,884 a.705 14 $1,950 ‘$1,662 $754 $4,365, 18 $1,950 $1,184 $985 $4,088 ta $195 $798 1,248 $9,995 20 $1150 e418. $11333 8,904 22 $1,950 $185 $1,862 $3,996 2a $1980 sas g2.235 gaz 26 | silas0 $9 $2160 §4.550 2s Si950 48 $8013. g5.012 30 $1,950 $155 $3,462 $5,596, 193-12 ratio of p toh Maximum Maximum = Ate (Pep | Inventory Level Shortage 3 2,000 300 1300 1 tale 707 07 2 1225 816 408 3 Ls 366 289 5 1.095 913 183 io 1049 953 95 (4-4kg ge4t 2 hO+ 022 PQ a eae + (oath toc2p) @ a ~& + (0.32h+ 2027) 20 3343 $= 989 TQ * i 7 M= | Caaht oop 19.814 bray ce) Magimam caventory = Length ef intertal Z = 94 > oh Length of interval ba Average inventory inintoral E = 222 r. tbee Ze tele Average iaventory in interval “ ; deal @ Trus the average inventory per toera ia 1s: OS ing cost per cycle is: (b-8) Tae ts gait Se os act sab = | cae 193-95 ay bate 00 aananayeny 50 lectin coe 0.2 inertoryhoking east ws NE US el tut eaten fomsal —Arnush Ani Tota ange ol ersr quanies Pusrace ‘Setup Hatdng —Varatia tegory Price LewerLinih Vapors soo a Gent Cash Gost Cont 7 S100 0 82 T6105 95.00 $500.00500 $2620.28 4090.00 573 GTO] 2 ‘998 $00 499 198.43 165.49 $494,000.00 $5,571.82 B1.8T.62 $407 140.25 % $9@ S00 raenaeo0 156.97 s00.09 seg8,000.00 "$820.00 $4500.00 $473,020.00 Bests Cooma = =a “otal Variable Gost = $473,020 D_ 5200 5} Orders placed per year = == ——— = 10.4 } rs placed per yi O7 500 Q ‘Time interval between orders = D7 B00 = (0.096 years)(52) = 5 weeks of 433 6 Date 365 (demand yea Gsatup cost) Aiewentary holding 9st rats] (4 of secount catsnonas) nro; 14-8{Lont’D) Annual Anrusl Amwtl — Tolal Purchase Setup Holding Yerabe Range of order quartiles Gest Cxiegoy Pee cover Lint Umpar Lint £02 Gt “Gast Goat" ow "sae 4987.85 4.90 $7,c00.00 497.24 $19.80 FT ST e 2 $880 so 89 Saas egei stazase s2ne 2008 $147886 2 $2.80 1000000000 69.30 100.00 si.s87.00 $18.25 428.00 $1,449.28 es or Tota vaiabe Goat 8 5 5} Orders placed per year= 2 ~ 365 _ 3.45 2” 100 sme inten Q_ 100 . ‘Time interva between orders = S = PP = (0.274 yeursyS2} = 14.25 weeks 5 B3-1Ta) Discount D.@ Category TM m eve K +48 ' TVC =(8.50)(400) + 0{ 2) «oye. (2 ) 2 TVC = (8)(400)+ of 12), 002 a 8) Q; 2 \ 3 THe =17.30y400) +60 +(0.2«7.50/ 2 Q) 2 bb Discount Category + = [2D '2(80)(400) 3 = jE oy 2(7.50) 207 Feasible Q c) Discount Category tye=ed+k 2442 Q7"2 3.80738 $3,520.00 $3,782.00 4-9‘sasuo Total Variable Cost s400a $3500 $3000 200 00 600 800 000 Order Quantity e} Q* = 200 with a TVC of $3,520, Date semandiyeay $20 (setup cost) inventory heigng cost cate! W of ciscount cate ‘Annval Annual Annual Total Range of orcer quanitios eurcnase Sete Hotaing Variable Category Price Lower Limit Upper Limit__£09_Q*_Cost_Cost_Gos!_Cost 1 $8.50 ° 99 104.03 69.00 $9,400.00 $029.29 $04.15 $9,607.38 2 $8.00 © 100 999 200.00 790.00 $3,200.00 $160.00 $180.00 $3.520.00, 2 $7.50 1000 reewoGed 208.58 1000.09 $2,090.00 $92.00 $750.00 $3,782.00 ests Optra O= 230] Teal verabie ost= $3,529 g) Since the value of Q that minimizes TVC for discount category 2 is feasible that means that this order quantity minimizes the annual setup and holding costs. Category 1 could therefore riot possibly have lower annual setup and holding costs. Furthermore, since the purchase price per case is higher for category I, it coutd not possibly have lower purchasing costs. Thus, we can eliminate category fas a candidute for providing the cptimal order quantity D_ 400 1) Orders placed per year = == 356 = ime i Q_ 200 _ orders = £ = — = (0,5 years)(12) = 6 months Time interval between orders = = T= =(0.5 years 12) 14-10193-8 Discount 4) Caregory 1 8 db) Discount Category 1 Tc aed+K +48 TVC = (1.00)(2400)+ co{ 22) +0.17,0.00/ 2) 2400 = 2: 2400 , 2 TVvC cosr2ae0y~ cf Q }-o ino.s( 2) TVC = (0.90)(2400)+ af 200) +0. ros 2) or or= or= 2 .. 2KD on 2400) | 455 0.171.00) 2(4) 2200) Yo17oas) ~ 5 202)2400) _ 554 0.17(0.90) 19-11d) $2500 Toal Variable Cast 2400 s2au0 s2200 300 200 300 400 500 Qrder Quantity, 8) Q* = 500 with a TVC of $2,217.45 ty Date De 2400 [domaniyeay k= $4 [sep cost 0.17 fewertary holding cost ate 9 ole Annual Annual Anaual—Telal Range of ordor quanttios Purciese Setup Hekirg —varasle caiege'y Price _Lower Lint Uspar limi Eoq _O* __—Gost_Cast__ Cast Cost 1 81.00 2 199 896.07 199.00 $2,400.09 $48.24 $16.02 $2465.16 2 30.35 200 499° 344.80 344.80 $2,260.00 $27.64 $27.84 $2,995.68 2 $6.90 600s puBeDEA 354.25 500.09 $2,160.09 $19.20 $9B.25 B2.217.45 300] $2,217.48 2} Since the value of Q that minimizes TVC for discount category 2 is feasible that cieans that this order quantity minimizes the annual setup and holding costs. Category | could therefore not possibly have lower annual setup and holding costs. Furthermoze, since the purchase price per bag is higher for category 1, it could not possibly have tower purchasing costs. Thus, we can eliminate category | as a candidate for providing the optimal order quantity, “Tosa vanavie Cos hy) Ord laced per year B 2400 4g )_ Orders placed per year = 5 =“ “Tine interval between orders = 2 = 2% = (0,21 yearsy(12) = 2.5 months BD 2400 1A-1294-1 : - Os=44+3=7 cg 74442019; a4 454 39) =9. (5) oc’) -9.9 OF -9944420159; 06) = 7444443 (2) 2156; of -4474.3(246) 0134 og=09 213.5 oP 213544440215; of) 29944464 3(2)-205; cif = 74448+.3(2 44) 2208 Peden +8 (24449)= 195; e-09 19.5 of) 2195+ 442= 255019 9544484 3 (4)=247:c19 9 8944484.3(444) =243 ff HT HAO + 3164448) = 2525019 0 4 413-49 4 4446412) 024.8; c= 69 = 24.3 Fa Gplimal production schedule isto producee 8 in period 1 and in period 4 at a cost of 19.4-2 k=2e=1,N=020, (Fy tor tgetad = (413,43) cya 243-5 oP Se 2eda tt; cl 2474.21) =98; c= of OP 9642495146; ch 5424743 (= 152; che 24 104.3446) =15; cg=c? 14.6 of) 1464244206; oF 964247 +2(9)=192; - a = 202; 4241442192849) =200; o= oF = 19.2 oF 5424114 .2048)~202; The optimal production schedule isto produce 7 in period { and 7 in peiod 3 at a cost of 19.2. 194-3 k= 2, (402.03, 0,) (1.4, 1,14, 1) N= 2, (ty tt) =, coounahy (ent) 19-43 a(eon) = ze 0 — | — ]13.4] 13.2] 14.0) 10.4,10.4 | 7 1 — | 12.4] 12.2] 13.0] 10.6] _ 94/6 2 9.4/11.2]12.0] 9.6] 17.0] _ 84) 5 3 8.2|11.0) 86] 10.0] 74 _ TALS 4 7.0} 7.6) 90) 64) — _ 64/3 5 46] 80) 54) — | — - 4610 6 40] 444—|—|— - 40] 0 7 qa4f—f—[—]— — | 14] 0 Rot Lat oO | 16.8] 17.2| 17.8] 18.4) 19.0] 18.8) 19.8/18.8/ 16.8 | 3 ‘The optimal production schedule is to produce 3 units in the first period and 7 units in the second Period at a cost of 16.8. tgh4 nlp Boyz) = ko + Gn Zn + 2- Max [0, Zp -3] +h Oin+ Zp - fn) tor O$2.50 Contr The goodwill cost would need to be at least $2.50 before § doughnuts should be prepared. 3a.e4 ay Optimal service level = L Condce Cane VEO = 0.667 (9-21P(domand s x) 0.78 = 0.667 as 025 100 200 360 400 500 600 700 Optimal ‘order quantity ©) Q* = 300+0,667(600-300) = $00 4) The probability of running shor is 1-0.667 = 0.333 = 33.3% ©) G 141.5 Gate = 115 __yg35 +€,, '15+05 0° Optimal service level = ‘aie Q* = 300+0.833(600-300) = 550 The probability of running short is 1-0.833 = 0.167 = 16.7% 13.65 Revenue {w/ shortages) = 500 ($3.00) = $1,500 b) Average number of loaves sold (w/out shortages 300 4 500-300 Average daily revenue (w/out shortages} = 400(S3.00) = $1,200, ¢) $1,500 x 9.333 = $500 (w/ shortages) $1,200 x 0.66 3800 (w/out shortages) Average daily revenue over all days = $500 + $800 = $1,300 200-0 d) Average number of loaves not sold = = 100 Average number of day-old Joaves obtained over all days = 100 x 0.667 = 66,7 Average daily revenue from day-old bread = 66.7 x $1.50 = $100 €) Average total daily revenue = $1,300 + $100 = $1,400 Average daily profit = $1,400 — $2(500) = $400 f) Average daily profit (600 loaves}= $3(450)-$2(600)+$11.50(150) = $375 $400-$375 8) Average daily profit (550 loaves) = $375 + = $387.50 19-22A966 a) Qt We: = 25loaves 2 Average daily shortage over all days = 25 x 0,167 = 4.167 Average daily cost of loss of goadwill = 4.167 x $1.50 = $6.25 Average daily profit (550 loaves & loss of goodwill) = $387.50 - $6.25 = hh) Average size of shortage (550 loaves) = $381.25 5 A 00-6 i) Average size of shortage (500 loaves) = SOloaves Average daily shortage over all days = 50 x 0.333 = 16.67 Average daily cost of loss of goodwill = 16.67 x $1.5 Average daily profit (500 loaves & lass of goodwill {service level) (b-a) = a + (0.667)(75) = a+ 50 b) Probability of incurring shortage = 1 - 0.667 = 33.3% which is the same as in problem 13.3. ©) Maximum shortage = b ~ (a + 50) =25 Maximum number of loaves that won't be sold = 50 ‘The corresponding numbers for problem 13.3 are 100 and 200 respectively which are four times the amounts here. d) The average daily costs of underordering and overordering for the new plan are 25% of the original costs. Thus, it is quite valuable to obtain as much information as possible about demand before placing the final order for a perishable product. &) Q*=a-+(service level) (b-a} = a+ (0.833)(75) =a + 62.5 Probability of incurring shortage = | - 0.833 = 16.67% Maximum shortage = b — (a + 62.5) = 12.5 Maximum number of loaves that won't be sold = 62.5 (@) y?=-Aln(S+0) 50 In(1000 +300) ~ 103 pen 10000 + 300 (©) Cy) =cy-x,)+L(y) and so when wa take the darivative with respect to y the term lvolving the initial inventory disappezrs, anc so the optimal policy is to order up to the same _amourt as in par (a). So order 103 - 23 = 80 parts. (c) We want the y such that P{ D “Arnon = ya-50In(0.1) 115 (@) (PS) 0.9 — 2-100 Log = o1pent.270 = p $12,700 7 st - — --- - a} This problem can be interpreted as an inventory problem with Uncertain demand for a perishable product with enro-traveler’s checks as the product. Once Stan gets back from his trip the checks are not good anymore so they ure a perishable, He can redeposit the amount ino bis savings account but will incur a fee of lost interest. Stan must decide how many checks to buy without knowing how many he will need Core = Valuc of 1 day ~ cost of 1 day — cost of | check = $49 Cy = Cost of check + lost interest = $3 (4-23b) Bible of Nature (Amount Needed) Expected Aernatwe | 10¢0_1109 1200 1300 1400 1500 1600 1700] Gost 0 0 0 80 109 150 200 259 | 60,00 8 3 3 0 $c $00 159 200 | 45.90 6 6 6 3 0 59 109 180 | 25.05 8 9 8 6 8 9 59 100 | 14.80 20120 12 «8 3850 | 8.85 Min mum ts 4s is 23s gs | 10.20 B05 94 0.15 0.25 02 01 0.1 0.05 Purchase 4 additional checks, 1 Service level for buying Service level for buying Service level for buying Service level for buying 3 = 0. Service level for buying 4 = 0.95 Sexvive level for buying 5 = 1 49 Gaur Eoy 4943 Optimal service level = Buy 4 additional checks. ay eusmes en 4 I = 9.94 095 088 fF 075 05s = Sunder Tander * Cover Optimal order quantity $969 9) Optimal service leve] = Swix. __3000 Caet+G,,. 300041000" °7° [9-28) Q=y+K,0 = 50+ (0.675\(15) = 60 ‘34-10 2) When interpreting this problem as an inventory problem, overbooked PeIe 3) reservations are the peeshable products that are being placed into inventory. b) Cape, = Jost fare = $250 Cres cost of certificate = $150 ©) Service level for accepting 0 = 0.05 Service level for accepting Service level for accepting Service level for accepting Service level for accepting Service level for accepting Service level for accepting Service level for accepting Service level for accepting 8 Optimal service level = — Ginter = 250 __ 595 Conia + Eney 250 150 Accept 5 overbooked reservation. d) Plleimand $ x} 1 0.95 03s ons Sane = = 0.695 Sunder *€over ~ OF cas 03 os ‘o0s 12345678 Optimal onder quantiy (F-25(9s-71 Following the development in Sec. 18.4 y = Conseyen YB Ede vo (S-y) 8p (Ed +kP{D2y) 0 y but if D is uniform on [a, by then PiDay)- BL . andso moyek = 5) 16. bk snoy)-plt-o Coimeyek FY stg) = BG) nc ok snoy)-ptt-oun and so the minimum occurs when k p+ Kc o)~ bea . inthis case, p=6+2, k= 14, he-(c-1), [a.b]={40, 40] P+ (a) COgye (ya) + p. Phdry}e cly-n) + pete = ley+pet-cx Alay c-petao o> EY. c/p > ys -talere) 34 So order up to yr ef xey,ard do not order otherwese. (b} Coy) “5 Ke Clute pes of yox pe at yox policy wel be opttmat nth Sabn le/y) Grd 4 the smallest value duck that Chrys cee Fr (4,8) 19.6713, Lips t Copper yo + SL G9 e540 = he -34 430 So cy sbi s yo -y+30 BCS) = SA0 = Gp-e)/Upeh) » (3-20/ta) «Ay Se5 ea Ld = Ke oS ets) Bho 54300156245 eNO be 4 20 mAs 5-H. ayy So the (4.8)2 13,5) polrey cs optimal. Single Period Medel With A Setup Cost: AS.6- 44 Demand density is exponential, with lambda = 25. Unit production or purchasing cost, ¢ = 1 Unit inventory holding cost, h = 0.4 Unit shortage cost, p = 1.5 Setup Cost, K = 10 Results: -1l.e3 S = 7.63454 19-26o) Single Period Model With No Setup Cost: 25. Demand density is exponential, with lambda Unit production or purchasing cost, c = 10 Unit inventory holding cost, h = 6 Unit shortage cost, p = 15 Results: ¥(0) = 6.79834 Two Period Model With No Setup Cost: Demand density is exponential, with lambda = 25, Unit production or purchasing cost, c = 10 Unit inventory holding cost, h = 6 Unit shortage cost, p = 15 Results: y1(0} = 23,2932 y2(0) = 6.79834 (a) Single Period Model With No setup cost: Demand density is uniform between 0 and 50. Unit production or purchasing cost, ¢ = 10 Unit inventory holding cost, h = 8 Unit shortage cost, p = 15 Results: y(0) = 10.8696 Ce) two Period Model With No setup cost: Demand density is uniform between 0 and 50. Unit production or purchasing cost, c = 10 Unit inventory holding cost, h = 8 Unit shortage cost, p = 15 9.26156 10.8696 19-241973 Infinite Pervod Model with no Setup Cost Demana density is exponential, with lambda = a5. Unit production oF purchasing cost, C=! Unit enventory helding cost, A=0.25 Unit shortage cost, pea Discount Facter = 0.9 Results: ylo) #46. 5/88 igi4 Two Period Model With Ho Setup Cost: Demand density is exponential, with lambda = 25. Unit production or purchasing cost, ¢ = 1 Unit inventory holding cost, h = 0.25 unit shortage cost, p = 2 Results: y1(0) = 36.521 y2(0) = 14.6947 Infinite Period Model With No Setup Cost: Demand density is exponential, with lambda = 25. Unit production or purchasing cost, c = 1 Unit inventory holding cost, h = 0.25 Unit shortage cost, p = 2 Discount Factor = 0.9 Results: y(0) = 46.5188 191-6 Infinite Period Model with No Setup cost: Demand density is exponential, with lambda = 1, Unit production or purchasing cost, c = 2 Unit inventory holding cost, h = 1 Unit shortage cost, p = 5 Discount Factor = 0.95 Results: y(0) = 1.69645 4197-7 Some 2s 19.1-€ above. 19-23Infinite Period Model With No setup cost: Demand density is uniform between 2,000 and 3,000. Unit production or purchasing cost, c = 150 Unit inventory holding cost, h = 2 Unit shortage cost, p = 30 Discount Factor = 0.9 Reeults » Yeo) = 2,468.15 194-9 Infinite Period Model With No setup Cost? Demand density is exponential, with lambda = 1000. Unit production or purchasing cost, c = 80 Unit inventory holding cost, h = 0.70 Unit shortage cost, p = 2 Discount Factor = 0.998 Results: Yto= 497 Adi+0 hed, peas oy * Cty) = 3 Pty ea 7484 sp 25 ay se MPa Gye 3 -28eHs 20 > GLY) attains chs minsrmarn at “425584 , since Grip = 28 C8 20 for amy y Naw K must be Found such that GlkI= Gik+400), or V3K +30 3.5 = .3ekropa te CMA 7.5 oF Woes C1-e%) +50 so Kz209a zat Note that Keal < yt 95.84 ¢ kMOO dat ,amd GI) & GUA) hemes the optirnal poliey > < (40) = (24,400) polzey Story 19TH Stick C20, He ansnce a2 identical fo that for problem 191-19 1g 7-12 o 4 Lope f ep einag + Fag ngipag BL) (9p BD dg Sie says “plage hae 44 So Se FEUD EO => ys PP +h Bade cu-ne0 > sy. be 44), as descred 9-24Cases 14.1 a) Robert's problem can be solved using the basic EOQ model. The data for the case is as follows: WD = 12430 = 360 Basic EOQ Model (Analytical) Results “order Porat = o Annual Setup Cost $37.50 Annuai Holding Cost $37.50 (Gemandyeary (setup cost) $0.15 (unit holding cost) 0 (lead time in days) (working days/year) Robert should order 500 toothbrushes 6 times per year. b) Now the lead time equals L = 6 days. We can use the hasic EOQ model again: Basic EOQ Model (Analytical) Results Reorder Point = 3¢ Annual Setup Cost $37.50 (setup cost} $0.15 (unit holding cost) 6 (lead time in days) 360_ (working days/year) Annual Holding Cost $37.50, Total Variable Cost= $75.00 Decision 3 (order quantity ‘Whenever the inventory of toothbrushes drops dowa to 50, Robert should place an order for 500 toothbrushes. He needs to place an order 6 times a yeat. ©) Now we need to consider the EOQ model with planned shortages. The shortage costs ane p= 1.50. 19-30EOQ Model with Planned Shortages (Analytical) Daa Results D= 3000 (demand/year) Max Inventory Level = K= $6.25 (setup cost) h= $0.25 — (unit holding cost) Annual Setup Cost = p= $1.50 (unit shortage cost) _| Annual Holding Cost Annual Shortage Cost Robert should place orders of about 524 toothbrushes. Because of the lead time of L = 6 days the reorder point is 47.67 + (3000/360)*6 = 2.33. The maximum shortage that occurs would be roughly 48 toothbrushes. 4) We compute the inventory policies for the two extreme cases p = 185 and p= 28 EOQ Model with Planned Shortages (Analytical) Results. Max lnventory Level = (emandyeary (setup cost) (unit holding cost) (unit shortage cost) Annual Setup Cost = Annual Holding Cost= $29.39 order quantity) (maximum shortage) The reorder point when p = $0.85 equals ~81.35 + (3000/360)*6 = -31.35 19-31EOQ Model with Planned Shortages (Analytical) Data Results 3000 ~~ (demand/year) Max Inventory $6.25 (setup cost} $0.15 {unit holding cost) Annual Sctup Cost = $37.39 $25.00 (unit shoriage cost) _| Annual Holding Co: | Annual Shortage Cost v The reorder point when p = $25.00 equals -2.99 + (3000/360)"6 = 47.01. We can conclude that as the shortage cost increases, the reorder point increases. ©) Now we need to consider the EOQ model with quantity discounts. There are 3 discount categories with prices of $1.25, $1.15, and $1.00 respectively. The holding cost rate equals T= 0.12, EOQ Model with Quantity Discounts (Axalytical) Dua 3000 (demandiyeary $6.25 (setup cost) 0.12 (inventory holding cost rate} 3._trumber. of discount categories) Acnual Annual Annual — Total Range of order quantities Purchase Setup Holding Variable Cary Price Lower Limit Upper Limit EGQ Q* Cos Cost__Cost_ Cost $1275, 0 ‘500. 500.00 500.00 $3,750.00 $37.50 $37.50 $3,825.09 SIS | 501 999°" 521.29 521.29 $3,450.00 $35.97 $35.97 §3,521.9 $1.00 1000 ©: 10000000. 559.02 1000.00. $3,000.00 $18.75. $60.00 $3,078.75 Results ‘The optimal order quantity equals Q =1000. Robert should order 3 times a year. (4-32e) Option | Annual shipping cost = «(2 sso f 26,000 = ($130)| — ss L 1093 Annual purchase cost = (26,000)($30) = $786,000. Average annual acquisition cost = $81,092 + $780,000 = $861,092. Option 2: ‘Annual shipping cost = «(2) +(83D ) +183)26,000) = $81,092, 26,0005 = 2(26,000) = $53,917. 678 I+ iG )) = $53.91 Annual purchase cost = (26,000)($30) = $780,000, Average annual acquisition cost = $53,917 + $780,000 = $833,917. £) Option 1: $3975 + $861,092 = $865,067. Option 2: $3504 + $833,917 = $837,421. = ($50) Option 2 should be selected. 'f-2 For the unaiysis of this case we use the template for perishable products. 2) First we need to determine the optimal service level for Howie. The unit sale price equa's $5, the unit purchase cost equal $3, and the unit salvage value equals 0.5*$3 - 0.5 = SI. Data Unit salvage value Cost ofunderordering= 2 Optimal Service Level= 0.5 Since Talia assumes that demand is uniformly distributed between 120 and 420 seis, Howie should order 120 + 0.5*300 = 270 sets. 19-33b) If Leisure Limited refunds 75% of the parchase cost, thea the unit salvage value for a returned set equals 0.75*$3-$0.5 = $1.75. We determine the new optimal service level: Data Results Cost of overordering = Cost of underordering = Optimal Service Level = 0.615385 ‘The order quantity is now 120 + 0.615385*300 = 304.62. Note that Howie can now order more sets at one time than he could under the scenario of part (a) because he is no: punished as severely as before when he fails to sell all sets. For the case of a 254 refund the unit salvage value equals $0.25. Data Results sale price Cost of overondering = Unit purchase cost 3 Unit salvage value 0.25 Cost of underotdering= 2 Optimal Service Level = 0.421053 Now the order quantity equals 120 + 0.421053*300 = 246,32. Howie must now purchase fewer sets at one time (compared to the previous scenarios) because he is, punished more severely if he fails to sell sets, c) Fora unit sale price of $6 and a 50% refund on returned firecracker sets, the optical service level can be determined as follows: Data Results it sale price = 6 “Unit purchase cost= 3 Unitsalvage value=" 1 However, if Howie raises the price of a firecracker set, one would expect that the demand for his sets will decrease, Therefore, Talia should not use the same uniform demand distribution that she used for her previous calculations of the optimal order quantity. 19-34) Talia's strategy for estimating the demand is overly simplistic. She makes the very simplifying assumption that the demand is uniformly distributed between 120 and 420 sets. However, she docs not take into account that the demand depends on the price of a firecracker set, She should expect that stands charging less than the average price of $5 per set typically sell more sets than stands charging $5 or even more than $5 per set, Talia should call Buddy again to try to obtain more detailed information, such as the range of sales and the average sale of stands charging $5 or $6 per set. Talia should also reevaluate her assumption that the demand is uniformly distributed. She should check how her forecasts change if she uses cther demand distributions, such as, for example, a normal distribution, 49.5, a) We can use the statistical functions in Excel to compute the sample mean and sample variance: 31 18 22 19 38 21 25 34. 28 27 Average 7.29154762—stand.dev The sample mean equals 28, and the sample variance equals 53.1667, 19-35" gitb) Based on the findings of Scarlett Windermere, American Aerospace can use a (R,Q) policy for the inventory of part 10003487. ‘The assumptions of this model are satisfied: 1. The part is a stable product 2. Its inventory level is under continuous review. 3. While the production of this part itself has ao lead time, it is typically delayed by the lead time of one and a half months of the litle steel part. Therefore, we can use this lead time for our analysis. 4. The demand for this part is the same as for the jet engine MX332, since it is only used for this particular engine. We therefore assume that the demand for the part is approximately normally distributed with a mean of 28 and a variance of 53.1667. 5, Excess demand is backlogged 6. There is a fixed setup cost K = 5800, a holding cost h = 750 and a shortage cost of p= 3250. Note that the average demand per year equals D = 12*28 = 336, The average demand during the one and a half months of lead time equals 1.5*28 = 42, and its standard deviation equals {.5* 7.29154762 = 10.9373214. Results “79.9753808 53.3357995 Data 336) (average demandvunit Une) $800 (Setup cost) 750 (unit holding cost) 3250 (anit shortage cost) 0.85 (service level) American Aerospace should implement an {R,Q) poticy with R = 53.34 and Q = 79.98 ©) For the computation of the approximate holding and setup cost we use the rounded values Q=80 and R= 53. The average inventory just before an order arrives equals 53 ~ 42 = 11, and just after the order has arrived it equals |1480 = 91. So, the average inventory level equals 51 resulting in average yearly holding cost of (approximately) 51*750 = 38250. The average number of setups per year equals 336/80 = 4.2 resulting in average yearly setup cost of 4.2*5800 = 24360. (9-36d) The new service level equals L = 0.95, e) Data Results 336 {average demand/nnit time) 5800 (Setup cost) 750 (unit holding cost) 3250 (unit shortage cost) 0.95 {service level) 59.990286 Demand During Lead Time Again, we round and use Q = 80 and R = 60. The average inventory just before an order arrives equals 80 - 60 = 20, and just alter the order has arrived it equals 20+80 = 100. So, the average inventory level equals 60 resulting in average yearly holding cost of (appccximately) 60*750 = 45000. Notice that the average yearly holding cost kas increased substantially, This should come as no surprise due to the increased safety stock (20 instead of 11). ‘Fhe average number of setups per year is still 336/80 = 4.2, resulting again in an average yearly setup cost of 4.2*5800 = 24360. Scaclett’s independent analysis of the stationary part 10003487 can only be justified since there is only a single jet engine that needs this part, and this part appears to be che bottleneck in the production process. But more often, the same stationary part will be used for several jet engines. As a result the demand for stationary parts Will depend on the demand for several jet engines, and a stozkout in one stationary part affects the demand for other parts: These interdependencies cannot be captured by an independent analysis of each part. Therefore, Scarlett's approach will most likely result in rather inaccurate inventory policies for many other Stationary parts, Scarlett could try to forecast the demand for jet engines based on sales data from previous years. 14-34