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T04 - Kel - 7 - Demand Variable & Lead Time Variable

Group 7's assignment includes Muhammad Arifin Julian, Fachryal Hiltansyah, and Rohmat Setiawan. The document discusses reorder point calculation when both demand and lead time are variable, including safety stock and service level. It provides an example problem about a company that stocks Cuban cigars with variable lead times and demand. The problem is solved to find the reorder point for 90% and 95% service levels.

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502 views12 pages

T04 - Kel - 7 - Demand Variable & Lead Time Variable

Group 7's assignment includes Muhammad Arifin Julian, Fachryal Hiltansyah, and Rohmat Setiawan. The document discusses reorder point calculation when both demand and lead time are variable, including safety stock and service level. It provides an example problem about a company that stocks Cuban cigars with variable lead times and demand. The problem is solved to find the reorder point for 90% and 95% service levels.

Uploaded by

rohmat_setiawan77
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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ASSIGNMENT 4

Group 7
1. Muhammad Arifin Julian (1606879823)
2. Fachryal Hiltansyah (1606870521)
3. Rohmat Setiawan (1806244540)
SUMMARY

Reorder point when Both Demand and Lead Time Are Variable
REORDER POINT

• The level of inventory which triggers an action to replenish that particular


inventory stock.
• It is a technique to determine when to order
• Under deterministic conditions when both demand and lead time are constant,
the reorder point is set equal to lead time x demand
• under probabilistic conditions when both demand and lead time varies, the
reorder point often includes safety stock
SAFETY STOCK

• Is the minimum level of inventory that is held as a protection against shortage


due to fluctuation in demand.
• It also determine the chance of a stockout during lead time. The complement
of this chance is called the service level
SERVICE LEVEL

• Is the probability of not incurring a stockout during lead time


• Service level of 90% means that there is a .90 probability that demand will be
met during lead time and .10 probability of a stockout
REORDER POINT WHEN BOTH DEMAND
AND LEAD TIME ARE VARIABLE

𝑅𝑂𝑃 = Average daily demand ∗ Average lead time in days + Safety Stock
𝑆𝑎𝑓𝑒𝑡𝑦 𝑆𝑡𝑜𝑐𝑘 = 𝑍 ∗ 𝜎𝑑𝐿𝑇
Where:
σd = Standar Deviation of demand per day
𝜎𝐿𝑇 = Standard Deviation of lead time in days
PROBLEMS

Number 12.48
QUESTION

Gainesville Cigar stocks Cuban cigars that have variable lead times because of the
difficulty in importing the product: lead time is normally distributed with an
average of 6 weeks and a standard deviation of 2 weeks. Demand is also a
variable and normally distributed with a mean of 200 cigars per week and a
standard deviation of 25 cigars.
a. For a 90% service level, what is the ROP?
b. What is the ROP for a 95% service level?
c. Explain what these two service levels mean. Which is preferable?
GIVEN

• Average daily demand = 200 cigars per week


• Standard deviation of demand (σd) = 25 cigars per week
• Average lead time = 6 weeks
• Standard deviation of lead time (𝜎𝐿𝑇 ) = 2 weeks
• Service level =
a. 90%, so Z = 1.282 (from Appendix I or the Excel formula = NORMSINV(.95))
b. 95%, so Z = 1.645 (from Appendix I or the Excel formula = NORMSINV(.95))
SOLUTION

a) A

𝜎𝑑𝐿𝑇 = 6 𝑥 252 + ( 200 2 𝑥 22 ) = 404,6≈405


ROP (90%) = (200 X 6) + 1,282( 405) = 1719 cigars
SOLUTION

b.) 𝜎𝑑𝐿𝑇 = 6 𝑥 252 + ( 200 2 𝑥 22 ) = 404,6≈405


ROP (95%) = (200 X 6) + 1,645( 405) = 1866 cigars

c.) For service level 90%, Reorder Point (ROP) is done when the
remaining stock is 1719 cigars.
For service level 95%, Reorder Point (ROP) is done when the
remaining stock is 1866 cigars.
We prefer the ROP for service level 95%, because it would be safer if the
demand of cigars is suddenly rises (in this case both lead time and demand are
variable).
THANK YOU!

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