Answers
Tutorial 7 - Solutions (Inventory Management - Part 2)
- Course
- Institution
- Book
Operations Management, Supply Chain Management
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
Get a Competitive Edge with the [Supply Chain Management Strategy, Planning, and Operation,Chopra,6e] 2023 Test Bank
-
Global Supply Chain Management (GSCM) Book Summary - IBA VU
-
E-commerce SCM summary lectures
Seller
Follow
bonouhw
Content preview
University professorDr.-Ing. Bernd Hellingrath
Chair for Information Systems and Sup-
ply Chain Management
Leonardo-Campus 3
48149 Münster
Tel. +49 251 83-38000
Fax +49 251 83-38009
Hellingrath@ercis.de
Tutorial Operations Management
Inventory Management (Part 2)
Suggested Solutions
Hint: Please round off to two digits.
Exercise 1: Newsvendor Model with Discrete Demand Distribution
a)
The Newsvendor Model takes into account variable ordering costs, carrying costs as well as
underage costs. The carrying costs, respectively the costs for overages, result from the costs
per unit minus the return price or residual value if there are any (co = c − v) . The underage
costs respectively the costs for shortages result from opportunity costs that are the losses of
profit caused by the underage costs (cu = r − c). In the Newsvendor Model, the demand is
regarded for only one period. Furthermore, the demand is assumed to be stochastic.
b)
18% 17%
16%
16% 15%
14%
14%
12%
10%
Frequency
10% 9%
8%
8%
6% 5%
4% 3% 3%
2%
0%
10 20 30 40 50 60 70 80 90 100
Demand [pieces]
, 2
c)
The costs of the given order quantities are calculated by multiplying the expected overage
with the costs for overages and multiplying the expected underages with the costs for under-
ages. Exemplary calculation for S=40:
co = c − v = 2.00 − 0.50 =1.50 [€/piece]
cu = r − c = 2.50 − 2.00 = 0.50 [€/ piece]
y f(y) S-y Z(|S-y|) Z(|S-y|)*f(y)
10 3% 30 45 1.35
Overage costs
20 5% 20 30 1.50
30 8% 10 15 1.20
40 10% 0 0 0.00
50 15% -10 5 0.75
60 17% -20 10 1.70
70 16% -30 15 2.40 Underage costs
80 14% -40 20 2.80
90 9% -50 25 2.25
100 3% -60 30 0.90
Z(S=40) 14.85
Therefore the expected costs of the different order quantities are calculated as:
S [pieces] Z(S) [€]
10 24.45
20 20.05
30 16.65
40 14.85
50 15.05
60 18.25
70 24.85
80 34.65
90 47.25
100 61.65
In this case, an order quantity of S=40 [pieces] is the optimal solution.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller bonouhw. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $6.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75323 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now