Operations Management: Processes and Supply Chains, 12th Edition

Solved Problem 4

MyLab Operations Manageament Video

A regional distributor purchases discontinued appliances from various suppliers and then sells them on demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Only when it is open for business can orders be received. The following data are estimated for a countertop mixer:

• Average daily demand $\left(\overline{d}\right)=100$ mixers

• Standard deviation of daily demand $\left({\sigma }_d\right)=30$ mixers

• Lead time $\left(L\right)=3$ days

• Holding cost $\left(H\right)=\text{\$}9.40/\text{unit}/\text{year}$

• Ordering cost $\left(S\right)=\text{\$}35/\text{order}$

• Cycle-service $\text{level}=92\text{ percent}$

• The distributor uses a continuous review Q system.

1. What order quantity, Q, and reorder point, R, should be used?

2. What is the total annual cost ...