Problem 1. Managing Manchego
A local specialty food store carries a wide variety of gourmet foods and cooking supplies. One of the things they are particularly known for is their wide variety of cheeses from around the world. Dave, the manager of the cheese department, is trying to determine the best way to manage the department's inventory. As a starting point he has decided to analyze this problem for Manchego, a popular Spanish cheese.
At the beginning of each week Dave can place an order for any cheese that he stocks. Based on past history, he has determined that average weekly demand for Manchego cheese is about 20 pounds, with a standard deviation of 6 pounds. Demand in a given week is approximately Normally distributed. It takes about 2 weeks for the cheese to be delivered once an order is placed. Dave is uncertain about the holding cost and lost sales cost. He simply decides he wants a 96% fill rate.
a) What is the optimal base-stock level that Dave should use when managing inventory of Manchego cheese?
Optimal base-stock level is _ __ _____ pounds.
b) Using the base-stock level in part a), how many pounds of Manchego cheese should Dave order at the beginning of a week if he has 25 pounds of Manchego on hand and 15 pounds in transit.
Optimal order quantity is __ _ ___ pounds.
PROBLEM 2. Elyssa's Elegant Eveningwear
Elyssa's Elegant Eveningwear (EEE) needs to ship finished good from its manufacturing facility to its distribution warehouse. The daily demand from the distribution warehouse is normally distributed with mean 1200 gowns, and standard deviation 300. The distribution warehouse expects a 98% fulfill rate from the manufacturing facility. EEE can choose from two different shipping plans for the gown delivery: premium parcel service (two days transit time), or public carrier (seven days transit time).
Please calculate the safety stock that the distribution warehouse needs to hold when different shipping service plan is employed.
If the premium parcel service is employed by EEE, the distribution warehouse needs to hold gownsas safety stock.
If the public carrier service is employed by EEE, the distribution warehouse needs to hold gowns as safety stock.