Posted on by Judy

Consider the inventory of disposable food trays at a hospital, which are ordered once a month. The demand for these trays, which cost the hospital $0.75 apiece, is forecasted to be 25,000 units per month (with a CV of 10%). The annual holding cost rate used at the hospital is 20% and the ordering cost is estimated to be $25. The lead time from order to receipt is 1 month. The desired service level is 95%. a. Calculate the order up to level (OUL). b. Calculate the order quantity if there are 22,456 food trays in inventory and another 25,407 in transit.

Coefficient of variation ( CV) IN % = Standard deviation of demand /Average demand x 100 = 10
Or, Standard deviation of demand / Average demand = 0.1
Or, Standard deviation of monthly demand / Average monthly demand of 25000 = 0.1
Or, Standard deviation of monthly demand = 25000 x 0.1 = 2500
Also to be noted :
Protection period = Order frequency + Lead time = 1 + 1 = 2 months
Standard deviation of demand during Protection period
= Standard deviation of monthly demand x Square root ( Protection period )
= 2500 x Square root ( 2 )
= 2500 x 1.414
= 3535
Z value corresponding to Service level of 95% = NORMSINV ( 0.95 ) = 1.6448
Therefore, Safety stock requirement
= Z value x Standard deviation of demand during protection period
= 1.6448 x 3535
= 5814.368 ( 5815 rounded to next higher whole number )
Thus , Order Upto Level ( OUL )
= average monthly demand x Protection period ( months) + safety stock
= 25000 x 2 + 5815
= 50000 + 5815
= 55815
ORDER UPTO LEVEL WILL BE 55815 UNITS
Order quantity
= Order upto level – Number of trays in transit – Number of trays in inventory
= 55815 – 25407 – 22456
= 7952
ORDER QUANTITY WILL BE 7952 FOOD TRAYS
 
“Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!”

What Students Are Saying About Us

.......... Customer ID: 12*** | Rating: ⭐⭐⭐⭐⭐
"Honestly, I was afraid to send my paper to you, but splendidwritings.com proved they are a trustworthy service. My essay was done in less than a day, and I received a brilliant piece. I didn’t even believe it was my essay at first 🙂 Great job, thank you!"

.......... Customer ID: 14***| Rating: ⭐⭐⭐⭐⭐
"The company has some nice prices and good content. I ordered a term paper here and got a very good one. I'll keep ordering from this website."

"Order a Custom Paper on Similar Assignment! No Plagiarism! Enjoy 20% Discount"

Related posts:

  1. Consider the inventory of disposable food trays at a hospital, which are ordered once a month. The demand for these trays, which cost the hospital $0.75 apiece, is forecasted to be 25,000 units per month (with a CV of 10%). The annual holding cost rate used at the hospital is 20% and the ordering cost is estimated to be $25. The lead time from order to receipt is 1 month. The desired service level is 95%. a. Calculate the order up to level (OUL). b. Calculate the order quantity if there are 22,456 food trays in inventory and another 25,407 in transit.
  2. Given the following inventory information: Demand 10+ n units per day Purchase cost = $15 per unit Ordering cost = $200 + $n per order Holding cost = $0.12 per unit per day Lead time 4 days Number of working days in a year 250 days mpe:55 245 p Demand = 10 + n = 10 + 45 = 55 units per day Ordering cost = $200 + $n = $200 + $45 = $245 per order Use your n (the summation of all digits of your ID number) to answer the following questions: Round your non-integer answers to four decimal places. Given the order quantity of 600 units, what is the total daily inventory cost, including the item’s purchase cost? A. B. What is the EOQ? C. At EOQ, what is the total annual inventory cost, including the item’s purchase cost? What is the reorder point? At EOQ, what is the length of order cycle ? D. E. https://d2vlcm61l7u1fs.cloudfront.net/media%2F6b8%2F6b8e37ee-e97c-4a10-a8fa-ac1cf0d6b604%2FphpE53cxC.png
  3. Using the following information, develop an optimum (minimum total cost) six-month aggregate plan 4 Total 1500 + n Month Forecast (units) 400 300 100 150 250 300 + n Beginning inventory of the first month-n Costs Output Regular time cost- S120 per unit Overtime cost $180 per unit Inventory holding cost $50 per unit per month on average inventory Back order cost = $200 per unit per month Average Inventory = (Beginning Inventory + Ending Inventory) / 2 Regular output 22 units per worker per month Overtime output maximum of 90 units per month for the entire company (all workers combined) Ending inventory for the sixth month 0 Strategy:Maintain workers and use ove ime Example: Sixth Month’s Forecasted Demand 300 + n = 300 45-345 units Total Forecasted Demand = 1500 + n = 1500 + 45 = 1545 units Beginning Inventory n- 45
  4. . An office building that operates 365 days per year maintains inventories of office supplies, including a specialized paper. Currently, this paper is ordered once every two weeks. Over the course of a year, its average rate of usage is 75 reams per week (with a forecast CV is 20%). The paper costs $20 per ream, and the holding rate is 15% annually. The fixed ordering cost is $35 and the lead time for receiving an order is 4 weeks. Target cycle service level is 93%. a. Calculate the preferred order up to level (OUL). b. If the manager switched to a fixed order quantity system with an optimal EOQ, how frequently would orders be placed? c. Do the results imply that daily ordering is too frequent?