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Chapter 4: Q8PE (page 554)

We have an item that we stock in our store that has fairly steady demand. Our supplier insists that we buy 1,200 units at a time. The lead time is very short on the item since the supplier is only a few blocks away and we can pick up another 1,200 units when we run out. How many units do you expect to have in inventory on average?

Short Answer

Expert verified

Answer

Inventory control systems are so large that they are not practical to model and provide a radical treatment to every item. However, it's useful to categorize the items in line with their yearly volume.

Step by step solution

01

Definition of Average inventory

Average inventorymay be a calculation that estimates the worth or number of a specific good or set of products during two or more specified periods. Average inventory is the mean of inventory within a specific time, which can vary from the median value of the identical data set, and is computed by averaging the starting and ending inventory values over a specified period.

02

Explanation

Since the inventory is not stocked

The inventory acquired is 1200

The supplier insists on the acquisition of another = 1200 (in case of running out of old stock)

So,expectedaverageinventory=12002=600units

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Most popular questions from this chapter

Daily demand for a certain product is normally distributed with a mean of 100 and a standard deviation of 15. The supplier is reliable and maintains a constant lead time of 5 days. The cost of placing an order is \(10 and the cost of holding inventory is \)0.50 per unit per year. There are no stockout costs, and unfilled orders are filled as soon as the order arrives. Assume sales occur over 360 days of the year. Your goal here is to find the order quantity and reorder point to satisfy a 90 percent probability of not stocking out during the lead time.

a. What type of system is the company using?

b. Find the order quantity.

c. Find the reorder point.

DAT, Inc. needs to develop an aggregate plan for its product line. Relevant data are

The forecast for next year is

Management prefers to keep a constant workforce and production level, absorbing variations in demand through inventory excesses and shortages. Demand not met is carried over to the following month. Develop an aggregate plan that will meet the demand and other conditions of the problem. Do not try to find the optimum; just find a good solution and state the procedure you might use to test for a better solution. Make any necessary assumptions.

Discuss the meaning of MRP terms such as planned order release and the scheduled order receipt.

Mark Price, the new productions manager for Speakers and Company, needs to Find out which variable most affects the demand for their line of stereo speakers. He is uncertain whether the unit price of the product or the effects of increased marketing are the main drivers in sales and wants to use regression analysis to figure out which factor drives more demand for its particular market. Pertinent information was collected by an extensive marketing project that lasted over the past 10 years and was reduced to the data that follow:

Year

Sales/unit

(Thousands)

Price/unit

Advertising

1998

400

280

600

1999

700

215

835

2000

900

211

1100

2001

1300

210

1400

2002

1150

215

1200

2003

1200

200

1300

2004

900

225

900

2005

1100

207

1100

2006

980

220

700

2007

1234

211

900

2008

925

227

700

2009

800

245

690

a. Perform a regression analysis based on these data using Excel. Answer the following questions based on your results.

b. Which variable, price or advertising, has a larger effect on sales and how do you know?

c. Predict average yearly speaker sales for Speakers and Company based on the regression results if the price was \(300 per unit and the amount spent on advertising (in thousands) was \)900

Demand for stereo headphones and MP3 players for joggers has caused Nina Industries to grow almost 50 percent over the past year. The number of joggers continues to expand, so Nina expects demand for headsets to also expand, because, as yet, no safety laws have been passed to prevent joggers from wearing them. Demand for the players for last year was as follows:

Month

Demand (units)

January

4200

February

4300

March

4000

April

4400

May

5000

June

4700

July

5300

August

4900

September

5400

October

5700

November

6300

December

6000

  1. Using linear regression analysis, what would you estimate demand to be for each month next year? Using a spreadsheet, follow the general format in Exhibit 18.8. Compare your results to those obtained by using the forecast spreadsheet function.
  2. To be reasonably confident of meeting demand, Nina decides to use three standard errors of estimate for safety. How many additional units should be held to meet this level of confidence?
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