Question

Foods Place sells Turkey sausages. The market demand for Turkey Sausages is uncertain but the mean is estimated to be 124000 packages/year with a standard deviation of 6800 packages/year. For each supply order processed the fixed cost includes a handling cost of $165/order plus a shipping cost of $380/order from the warehouse to the Foods Place. The holding cost for the sausage is $1.3/package/year. The supply lead time is fixed at 2 weeks.

1) For a target service level of 90% what is the (Q,R) reorder policy ? Assume 52 weeks in a year.

a) Q (Economic Order Quantity) ?

b) R (Reorder Level in decimal places) ?

2) What is the average order cycle time (time between orders)? Time unit = week; (2 decimal places).

3) The supply chain manager discovers that the supply time is not constant but normally distributed with a standard deviation of 0.75 weeks. What is the new reorder level in 2 decimal places?

Answer 1

Thank you so much sir