Determine the order quantity Q, safety stock, and reorder point R

Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter7: Distance And Approximation
Section7.3: Least Squares Approximation
Problem 31EQ
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[Multi-period inventory] STH hospital currently uses two types of surgical gloves (G1
and G2) for their healthcare workers. The annual demand for each is normally distributed. For
G1 the mean is 5,000 pairs with a variance of 3,000; for G2 the mean is 8,000 pairs with a
variance of 5,000. Each pair of gloves costs $3 (regardless of type), the cost to place an order is
$100, and STH uses an annual holding cost of 20% of the value. Demand between G1 and G2 is
independent. STH uses an (Q,R) system where Q is determined by the EOQ and a service level
of 97% is used. The replenishment lead time is 5 weeks for each glove type. (You can assume
each year has 52 weeks.)
a. Determine the order quantity Q, safety stock, and reorder point R for each type
of gloves.
AB b. According to the risk pooling strategy, STH decides that is will standardize by
using G1 to meet all demand for gloves. Determine the new order quantity Q, safety
stock, and reorder point R for G1
Transcribed Image Text:[Multi-period inventory] STH hospital currently uses two types of surgical gloves (G1 and G2) for their healthcare workers. The annual demand for each is normally distributed. For G1 the mean is 5,000 pairs with a variance of 3,000; for G2 the mean is 8,000 pairs with a variance of 5,000. Each pair of gloves costs $3 (regardless of type), the cost to place an order is $100, and STH uses an annual holding cost of 20% of the value. Demand between G1 and G2 is independent. STH uses an (Q,R) system where Q is determined by the EOQ and a service level of 97% is used. The replenishment lead time is 5 weeks for each glove type. (You can assume each year has 52 weeks.) a. Determine the order quantity Q, safety stock, and reorder point R for each type of gloves. AB b. According to the risk pooling strategy, STH decides that is will standardize by using G1 to meet all demand for gloves. Determine the new order quantity Q, safety stock, and reorder point R for G1
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