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Facing the fluctuating demand the lead time, Osprey Co. is trying make its inventory

decision for the best seller for the next year. You, as a COO, are given the responsibility

to make inventory decisions for the company.

You can access the demand, lead time, and cost information from the chart below:

The CEO of the company hopes to achieve 94% in-stock rate for the next year.

Based on your calculation, please answer the following questions:

1. Whats the order quantity would you recommend for the product?

2.How much safety stock is needed to achieve a 94% in-stock rate?

3. What is the proportion of demand filled from on-hand inventory (beta)?

4. There are two producers located 300 miles apart. Producer A has a material cost of $35

per unit, labor cost of $20 per unit, and transportation cost of $1 per unit per mile.

Producer B has a material cost of $40 per unit, labor cost of $10 per unit, and

transportation cost of $1.50 per unit per mile.

1. Please calculate the landed cost of producer A and B for each unit production,

respectively.

2. Please determine the extent of market between the two producers.

Notation Parameter Mean annual demand Standard deviation of annual demand Mean lead time Standard deviation of lead time Inventory holding cost factor Unit purchase cost Holding cost per unit per year Ordering cost per order Order Quantity Mean demand during the lead time Standard deviation of demand during the lead time Type 1 Service Level Standard normal variate Safety Stock Expected units out of stock during the lead time Type 2 Service Level Reorder point e 615U IMO Value Measurement 8,000 units per year 550 units per year 0.05 years 0.15 years 14.0% per year per dollar of average inventory 50.00 per unit per unit per year 168.00 per order units units per lead time 1,206.3 units per lead time =SQRT(L*sD^2+D^2*SL^2) ODL alpha units SS nR beta 481.24 units per cycle =SDL*NORMDIST(2,0,1,0)-SS*(1-NORMDIST(2,0,1,1)) units Notation Parameter Mean annual demand Standard deviation of annual demand Mean lead time Standard deviation of lead time Inventory holding cost factor Unit purchase cost Holding cost per unit per year Ordering cost per order Order Quantity Mean demand during the lead time Standard deviation of demand during the lead time Type 1 Service Level Standard normal variate Safety Stock Expected units out of stock during the lead time Type 2 Service Level Reorder point e 615U IMO Value Measurement 8,000 units per year 550 units per year 0.05 years 0.15 years 14.0% per year per dollar of average inventory 50.00 per unit per unit per year 168.00 per order units units per lead time 1,206.3 units per lead time =SQRT(L*sD^2+D^2*SL^2) ODL alpha units SS nR beta 481.24 units per cycle =SDL*NORMDIST(2,0,1,0)-SS*(1-NORMDIST(2,0,1,1)) units

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