Assignment Task :

Economics

 

You need to make two decisions: the economic order quantity q and the safety stock level q0.

  • Determine the economic order quantity q: use the EOQ formula with average demand rate, holding cost, and set-up cost
  • Determine the safety stock level q0:
  • The demand during the lead time is a normal random variable with mean a and variance b, namely, D ~ Normal(a, b). (You need to figure out the values of a and b using the information given.)
  • The safety stock level q0 should be such that q0 meets the demand during a lead time with 98% probability, namely, Probability (q0 >= D) = 0.98. (You need to figure out the value of q0 using knowledge on a normal distribution.
  • The meaning of safety stock is that: You place an order of size (q + q0) for the first order. After this, you place an order of size q whenever the inventory level drops below the safety stock level q0.
  • n your solution, please report q and q0.

 

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  • Uploaded By : Grace
  • Posted on : December 14th, 2018

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