Rop Pom
ROP based on Normal Distribution of LT demand -Example No. 1
Example : Suppose that the manager of a construction supply house determined from historical records that demand for sand during leadtime averages 50 tons. In addition, suppose the manager determined that the demand during leadtime could be described by a normal distribution that has a mean of 50 tons and a standard deviation of 5 tons. Answer the following questions, assuming that the manager is willing to accept a stockout risk of no more than 3 percent:
a) What value of z is appropriate?
b) How much safety stock should be held?
c) What reorder point should be used?
SOLUTION:Expected leadtime demand = 50 tons dLT=5 tons
Stockout risk = 3 percent
a)From Appendix B, Table B, using a service level of 1 -.03 = .9700, a value of z = +1.88is obtained.
b)Safety stock = zdLT= 1.88(5) = 9.40 tons
c)ROP = Expected leadtime demand + safety stock = 50 + 9.40 = 59.40 tons
ROP based on Normal Distribution of LT demand
1)If only demand is variable, then dLT= LT dand ROP = dx LT + z LT d where,d = Averagedaily or weekly demand
2)If only leadtime is variable, then dLT= dLTand ROP = dx LT + z dd where,d = daily or weekly demand
LT = Averageleadtime in days or weeks
LT= Standard deviation of lead time in days or weeks
3)If both demand and leadtime are variable, then dLT= LT d2+ d2 2LT and ROP = dx LT + zLT d2+ d2 2LT
NOTE: Each of these models assumes that demand and leadtime are independent ROP based on Normal Distribution of LT demand -Example No. 1 A restaurant uses an average of 50 jars of a special sauce each week. Weekly usage of sauce has a standard deviation of 3 jars. The manager is willing to accept no more than a 10 percent risk of stockout during leadtime, which is two weeks. Assume the distribution of usage is normal.
a)Which of the above formulas is appropriate for this situation? Why?
b)Determine the value of z.
c)Determine
Example : Suppose that the manager of a construction supply house determined from historical records that demand for sand during leadtime averages 50 tons. In addition, suppose the manager determined that the demand during leadtime could be described by a normal distribution that has a mean of 50 tons and a standard deviation of 5 tons. Answer the following questions, assuming that the manager is willing to accept a stockout risk of no more than 3 percent:
a) What value of z is appropriate?
b) How much safety stock should be held?
c) What reorder point should be used?
SOLUTION:Expected leadtime demand = 50 tons dLT=5 tons
Stockout risk = 3 percent
a)From Appendix B, Table B, using a service level of 1 -.03 = .9700, a value of z = +1.88is obtained.
b)Safety stock = zdLT= 1.88(5) = 9.40 tons
c)ROP = Expected leadtime demand + safety stock = 50 + 9.40 = 59.40 tons
ROP based on Normal Distribution of LT demand
1)If only demand is variable, then dLT= LT dand ROP = dx LT + z LT d where,d = Averagedaily or weekly demand
2)If only leadtime is variable, then dLT= dLTand ROP = dx LT + z dd where,d = daily or weekly demand
LT = Averageleadtime in days or weeks
LT= Standard deviation of lead time in days or weeks
3)If both demand and leadtime are variable, then dLT= LT d2+ d2 2LT and ROP = dx LT + zLT d2+ d2 2LT
NOTE: Each of these models assumes that demand and leadtime are independent ROP based on Normal Distribution of LT demand -Example No. 1 A restaurant uses an average of 50 jars of a special sauce each week. Weekly usage of sauce has a standard deviation of 3 jars. The manager is willing to accept no more than a 10 percent risk of stockout during leadtime, which is two weeks. Assume the distribution of usage is normal.
a)Which of the above formulas is appropriate for this situation? Why?
b)Determine the value of z.
c)Determine