Operations Management
Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks, with each trip costing $1,000. The motorcycle plant assembles and sells 300 motorcycles each day. Each engine costs $500, and Harley incurs a holding cost of 20 percent per year.
a. How many engines should Harley load onto each truck?
b. What is the cycle inventory of engines at Harley?
Question #2
Weekly demand for HP printers at a Sam's Club store is normally distributed, with a mean of 250 and a standard deviation of 150. The store manager continuously monitors inventory and currently orders 1,000 printers each time the inventory drops to 600 printers. HP currently takes two weeks to fill an order.
a. How much safety inventory does the store carry?
b. What CSL does Sam's Club achieve as a result of this policy?
c. What fill rate does the store achieve?
Question #3
Weekly demand for Motorola cell phones at a Best Buy store is normally distributed, with a mean of 300 and a standard deviation of 200. Best Buy has a policy of ordering the cell phones in lots of 500. Motorola takes two weeks to deliver an order.
If Best Buy is targeting a CSL of 95 percent and monitors its inventory continuously:
a. How much safety inventory of cell phones should Best Buy carry?
b. What should its ROP be?
If Best Buy is targeting a fill rate of 99 percent and monitors its inventory continuously:
c. How much safety inventory of cell phones should Best Buy carry?
d. What should its ROP be?
Question #4
Home Depot sells the LawnBoy T650 lawn mowers at 49 stores in the Pacific Northwest. Weekly demand for the T650 at each of the stores is identical and given by:
X ~ Normal (50, 30)
Assume that the demands at the 49 stores are independent of each other. The manufacturer's lead time for supplying the mowers is 9 weeks. Home Depot has a stated policy of 90% cycle service level for mowers.
a. How much safety stock is required at each store?
b. The chain is considering centralizing the inventory of the T650 to a distribution center that will serve all 49 stores. How much safety stock would be required at the DC to provide the same cycle service level of 90%?
c. If the cost of each mower is $400, and Home Depot uses a 30% holding cost rate, what is the annual savings for the chain in inventory holding costs as a result of the centralization?
Question #5
Epson produces printers for sale in Europe in its Taiwan factory. Printers sold in different countries differ in terms of the power outlet as well as the language of the manuals. Currently, Epson assembles and packs printers for sale in individual countries. The distribution of weekly demand in different countries is normally distributed, with means and standard deviations as shown below: Country
Demand
Mean
Standard Deviation
France
3,000
2,000
Germany
4,000
2,200
Spain
2,000
1,400
Italy
2,500
1,600
Portugal
1,000
800
UK
4,000
2,400
Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between the two plants using trucks, with each trip costing $1,000. The motorcycle plant assembles and sells 300 motorcycles each day. Each engine costs $500, and Harley incurs a holding cost of 20 percent per year.
a. How many engines should Harley load onto each truck?
b. What is the cycle inventory of engines at Harley?
Question #2
Weekly demand for HP printers at a Sam's Club store is normally distributed, with a mean of 250 and a standard deviation of 150. The store manager continuously monitors inventory and currently orders 1,000 printers each time the inventory drops to 600 printers. HP currently takes two weeks to fill an order.
a. How much safety inventory does the store carry?
b. What CSL does Sam's Club achieve as a result of this policy?
c. What fill rate does the store achieve?
Question #3
Weekly demand for Motorola cell phones at a Best Buy store is normally distributed, with a mean of 300 and a standard deviation of 200. Best Buy has a policy of ordering the cell phones in lots of 500. Motorola takes two weeks to deliver an order.
If Best Buy is targeting a CSL of 95 percent and monitors its inventory continuously:
a. How much safety inventory of cell phones should Best Buy carry?
b. What should its ROP be?
If Best Buy is targeting a fill rate of 99 percent and monitors its inventory continuously:
c. How much safety inventory of cell phones should Best Buy carry?
d. What should its ROP be?
Question #4
Home Depot sells the LawnBoy T650 lawn mowers at 49 stores in the Pacific Northwest. Weekly demand for the T650 at each of the stores is identical and given by:
X ~ Normal (50, 30)
Assume that the demands at the 49 stores are independent of each other. The manufacturer's lead time for supplying the mowers is 9 weeks. Home Depot has a stated policy of 90% cycle service level for mowers.
a. How much safety stock is required at each store?
b. The chain is considering centralizing the inventory of the T650 to a distribution center that will serve all 49 stores. How much safety stock would be required at the DC to provide the same cycle service level of 90%?
c. If the cost of each mower is $400, and Home Depot uses a 30% holding cost rate, what is the annual savings for the chain in inventory holding costs as a result of the centralization?
Question #5
Epson produces printers for sale in Europe in its Taiwan factory. Printers sold in different countries differ in terms of the power outlet as well as the language of the manuals. Currently, Epson assembles and packs printers for sale in individual countries. The distribution of weekly demand in different countries is normally distributed, with means and standard deviations as shown below: Country
Demand
Mean
Standard Deviation
France
3,000
2,000
Germany
4,000
2,200
Spain
2,000
1,400
Italy
2,500
1,600
Portugal
1,000
800
UK
4,000
2,400
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