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Chopra and Meindl Chapter 12 Examples 12-1 to 12-8: safety inventory and the periodic-review order-up-to level

ToolInventory Policy
SourceChopra, S., and Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation, 6th ed. Pearson, Boston. Chapter 12, Examples 12-1 to 12-5 and 12-8.
LevelUndergraduate

Problem

Weekly demand for a product is normal with mean 2,500 and standard deviation 500 and the replenishment lead time is 2 weeks. Evaluate the continuous-review policy Q = 10,000, ROP = 6,000 (safety inventory, cycle service level, fill rate), find the safety inventory for a 90 % cycle service level, and then the order-up-to level of a periodic-review policy with a 4-week review period at the same service level.

Inputs to Enter

  • Model (R, S) periodic review (loads the example), period week: demand 2,500, demand SD 500, lead time 2, review period 4, service level 90 %
  • Examples 12-1 to 12-5 through the (Q, r) model with Q = 10,000 and r = 6,000 evaluated
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Answers

  • Lead-time demand μ_L = 5,000, σ_L = 500 √2 = 707; safety inventory 1,000, average inventory 6,000, flow time 2.4 weeks, CSL = 0.92, ESC = 25, fill rate 0.9975
  • CSL 0.90: ss = NORMSINV(0.90) × 707 = 906; fill rate 0.975: ss = 67 (book GOALSEEK)
  • Periodic review: σ over T + L = 500 √6 = 1,225, ss = 1,570, order-up-to level 15,000 + 1,570 = 16,570, mean order 10,000

Notes

Choose the (R, S) model for Example 12-8; the select fills the inputs. Examples 12-1 to 12-5 need the (Q, r) model with the same demand and the evaluated policy entered.

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