Sport Obermeyer, Ltd - Inventory and Global Sourcing

This assignment is designed for practicing the concepts and tools covered in the inventory models.

1. Parka Production
We use the sample data given in Exhibit 10 from the Sport Obermeyer case.  Assume demand of each style of parka is normally distributed.  

a) Make a recommendation for how many units of each style Wally Obermeyer should order during the initial phase of production. Assume that all ten styles in the sample problem are made in Hong Kong. Also assume that there would be no future production for these parkas (i.e., only one production decision is taken to satisfy the demand). Ignore the minimum order quantity constraint, and ignore the fact that the total size of your order must be less than or equal to 10,000.  

b) Take your answers to part a) above, and reduce the number of units for each style by 10%. At this level of reduced production, if you could produce just one more unit, which of the ten styles would you choose?

2. Stocking Needles
A local pediatrician's office is reviewing its stocking policy for needles used to give children vaccinations against childhood illnesses. A new needle is used for each vaccination, and historically these needles have been used at an average rate of 25 needles per day. (The office is open approximately 300 days per year.) Each time an order is placed it costs the office about $8 to place the order (regardless of the quantity purchased), and needles are typically delivered 4 business days after the order is placed. It costs about $0.20 to hold a needle in stock for one year. (Assume that the office can order needles in any quantity.)

a) Ignoring any uncertainty in daily demand, calculate the EOQ the doctor's office should use for ordering their needles. (Round up to the nearest needle.) When should the office order more needles (i.e., at what inventory level)?

b) How often will the office place an order?

c) In reality, the supply manager knows that demand does exhibit some uncertainty. In fact, the manager has estimated that daily demand is Normally distributed with a standard deviation of 8 needles. Suppose the supply manager wants to use the order quantity calculated in part a), and also wants to guarantee that 98% of the time they have enough needles to serve the patients who arrive. Calculate the optimal base-stock level as an approximation for the reorder point r that the office should use to achieve this. What is the reorder point r?  (Round up to the nearest needle.)

Base your remaining answers on your answer to part c).

d) Suppose that the office currently has 20 needles in stock, and they placed their most recent order 3 days ago. How many needles should the manager order now?

e) Suppose that the office currently has a stock of needles equal to your answer in part c), and they placed their most recent order 26 days ago. How many needles should the manager order now?

Attached file(s):

ObermeyerEx10.xls  View File