Lab # 7: Safety Stock Product Cycling

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Presentation transcript:

Lab # 7: Safety Stock Product Cycling OMG 402 Lab # 7: Safety Stock Product Cycling

Inventory Policies Extend the EOQ to more realistic applications demand is no longer constant Take into account production product cycling

Problem #1: Fashion Statement (a) Optimal number of coats Assume from now on that Natalie buys the number of coats suggested above Why is this a Newsboy-type problem? Pr{d < Q} = marginal profit /(marginal cost + marginal profit)

Natalie’s Fashion (b) Probability that coats sell out Probability that coats do not sell out

Natalie’s Statement (c) Expected number of coats sold GIVEN THAT coats do not sell out (d) Expected profit What is the distribution of number of coats sold GIVEN THAT coats do not sell out ?

Problem #2: Cat Lovers Revisited (a) Does EOQ change? Why or why not? (b) How many orders per year do they place (on average)? Has this changed from the midterm setup?

More Cat Lovers (c) Statistical gyrations about lead time demand. Expected: Standard deviation: Why are we doing this?

Meow (d) Calculations i. Safety stock ii. Reorder point (e) How many stockouts per year does this imply? But, what does it all really mean, anyway? Additionally, how do you recognize a Safety Stock problem? R SS R+Q t

Supply Chain difficulties (f) Supplier now cannot guarantee a fixed lead time. Must now take into account the variation in lead time. What effect does it have on demand during lead time? What’s the new safety stock level? How much more does it cost?

Other Inventory Policies The order-point order-quantity we’ve been using is a “continuous review” policy Can also use “periodic review” policies Orders only placed once a month for example “(S,s)” policy Base Stock system

Problem #3: Product Cycling for Paint What’s the big issue we need to address under this situation? What are the components of the problem? What are the key issues and tradeoffs?

Paint (a) The answer sheet provides two different methods for finding the cycle time: What’s the difference Is there a situation where one of them can’t be used? (b) Do the algebra to find the new setup time: Can use either of the two formulas

Azur Paint (b) Maximum amount of paint in inventory? (c) Average amount of paint in inventory? t

All Paints (d) Now calculate the average inventory level for all paint Use spreadsheet Add it up