Assignment 4 / Marius Anton Hessenthaler / 2018-81739

1)
retail price: 300, Demand: R = 30/week= 30*52/year=1560, Q:300, order price: c = 150, lead
time: 2 weeks, Shipping costs: 125, Capital cost(year): 0,2,
a)
Holding cost per unit per year = 150*0,2 = 30
S∗R H∗Q 125∗1560 30∗300
Annual costs = c∗R + + = 150∗1560+ + =239150
Q 2 300 2
b¿
2 SR 2∗125∗1560
Q EOQ=
√ H √
=Q EOQ=
30
=¿114.018
She should order a quantity of 114 dress in each order.
I assume that the demand is constant.
The lead time per delivery is 2 weeks. In 2 weeks she is going to sell 60 more dresses.
She needs to order when her inventory is at 60 dresses.
S∗R H∗Q 125∗1560 30∗114
Annual costs = c∗R + + = 150∗1560+ + =237420.53
Q 2 114 2
Or
Annual costs = Material cost +
C EOQ =c∗R+ √ 2 SRH =150∗1560+ √ 2∗125∗1560∗30=23 742 0.53
2)
Demand ∼N(400,1502), Lead time = 2 weeks, Q = 4*400=1600, Order time = 920 units
Safety inventory = OrderInventory - InventoryToCoverLeadTime = 920 – 800=120
a)
2-week-Demand ∼N(800,(¿150)2)
X is demand of 2 weeks
SL=P(x<=920)=1-Normdist(920,800,√ 2∗¿ 150,true)=0.71420
They provide a customer service level of 71.42%
b)
ROP = Norminv(CSL, μ,σ ) = Norminv(0.95,800,√ 2∗¿ 150) = 1148.93
The ROP is 1149, so they should produce the next batch when the inventory is at 1149
3)
R=4000/week=50*4000/year=200000/year, c=200, capital cost=0.2, S=900
a)
Holdingcost per unit per year=200*0.2=40
2 SR 2∗900∗200000
Q EOQ=
√ H √=
40
=¿ 3000
The Optimal order size is 3000 units.
b)
R=4000/week, Average I=3000/2=1500
T=I/R = 1500/4000=0.375 weeks
A unit spends on average 0.375 weeks in the system.
c)
We do not have the advantage of pooling because the demand is still not aggregated, and
we cannot send units from one warehouse to another. Hence, we cannot reduce safety
inventory.
However, the Shipping costs are reducing, therefore the Optimal order size changes.
Per Outlet:
2∗1800
Q EOQ=
√
whole order
2 SR
H
=
√ 4
∗200000
40
=2121.32 -> 4*2121.32 = 8485.28 for all outlets or the

Average Inventory per outlet=2121.32/2=1060.66

The Average inventory is now 1060.66, it should decrease. Therefor it is also decreasing
across the four outlets.

4)
Assumption: Albert doesn’t pursues the online initiative or Bumyang does not knows about
it.
Bumyang Shipping wants the optimal order quantity to be at 450.
We want to find out what shipping cost they should charge to the optimal order quantity is
450.

If they charge a shipping fee of 1794.88, Albert Optimal order quantity will be 450.

In case they now about the new initiative:

2∗S∗22000 4502∗39
450=
√ 39
↔ S=
2∗22000
=¿ 179.49
In case of the new initiative they should charge 179.48.
5)
Cu r −r 780−500
Optimal service level = SL* = = H L= =0.359
Cu +C o rH 780
Optimal Protection Level= Q* = Norminv(SL*, μ , σ ¿=Norminv(0.359,150,45)=133.756  134
The airline should save 134 seats for high fares.