Exercise 7
A distributor places an order every 3 weeks. The lead-time of an order is 2 weeks. When an order is placed, it needs $4,500. The average value and standard deviation of weekly demand are 44.58 and 32.08 respectively. The distributor needs to serve the customers at the level of 97% (z = 1.88)
Compute the average inventory level?
Exercise 8
T he following table provides historical data of a typical product of ABC. The tables includes weekly demand information of the product for the last 4 weeks in each market area.
Table: Weekly demand in thousand units
The weekly demand follows normal distribution. It costs $1,200 whenever a warehouse places an order. The annual holding cost is $65 per unit. It usually takes 3 weeks for the factory to fulfill an order. ABC has considered an alternative distribution strategy in which the two regional warehouses are replaced with one single and central warehouses to fulfill all customer orders. The CEO insists to maintain the service level of 98% (which has the corresponding service factor of 2.05).
Calculate the average inventory of each system. Should ABC adopt the alternative system?
Share with your friends: | 
