In: Operations Management
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A barista shop in NYC is open 200 days per year and sells an average of 77 pounds of Koko coffee beans a day. (Demand is assumed to be normally distributed with a standard deviation of 15 pounds per day). After ordering, with a fixed cost of $19 per order, beans are always delivered from Uganda in exactly 4 days. Annual holding costs for the beans are $3/pound.
Note: round all answers to two (2) decimal places and don't type commas or separators, only a period to indicate decimals.
a) The economic order quantity (EOQ) for Koko coffee beans is: Blank 1. Fill in the blank, read surrounding text. pounds per order.
b) The total annual holding costs of stock for Koko coffee beans are: $ Blank 2. Fill in the blank, read surrounding text. .
c) The total annual ordering costs for Koko coffee beans are: $ Blank 3. Fill in the blank, read surrounding text. .
d) Assume that management has specified that no more than a 1% risk of stockout during lead time is acceptable. The reorder point (ROP) is: Blank 4. Fill in the blank, read surrounding text. pounds.
e) The safety stock needed to attain a 1% risk of stockout during lead time is: Blank 5. Fill in the blank, read surrounding text. pounds.
A barista shop in NYC is open 200 days per year
Per day demand =DD= 77 pounds
Annual Demand = D=200*77= 15400 pounds
standard deviation= σ= 15 pounds per day
Cost of Ordering =Co=$19 per order,
Lead time= L= 4 days
Annual holding cost = Ch= $3/pound
a.
EOQ is
=441.66 Pounds per order
a.The economic order quantity (EOQ) for Koko coffee beans is: 441.66 Pounds per order
b. total annual holding costs is
= (Q/2)* Ch
= (441.66/2)*3
=662.49
b.The total annual holding costs of stock for Koko coffee beans are $662.49
c. The total annual ordering costs is
=number of orders * Co
No. of orders = (D/Q) = 15400/441.66 = 34.87
= 34.87 *19
=662.53
c.The total annual ordering costs for Koko coffee beans are: $662.53
d.
ROP can be calculated as
ROP = SS + Lead time demand
= Z * σL + DD * Lead time
1% stockout is allowed so expected availability = 99% and Z for 99% CSL = 2.33
σ = Standard deviation = 15 pounds per day
σL = Standard deviation of demand over lead time = = =30
ROP = 2.33 *30 +77*4
=377.90
d.The reorder point (ROP) is:377.90 pounds
e. The safety stock needed to attain a 1% risk of stockout during lead time is
=Z * σL
= 2.33 * 30 = 69.9
e. The safety stock needed to attain a 1% risk of stockout during lead time is 69.9 pounds
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