Tobacco is shipped from Tillsonburg, Ontario, to a cigarette manufacturer in Cambodia once a year. The reorder
Question:
Tobacco is shipped from Tillsonburg, Ontario, to a cigarette manufacturer in Cambodia once a year. The reorder point, without safety stock, is 200 kilograms. The carrying cost is $15 per kilogram per year, and the cost of a stockout is $70 per kilogramper year. Given the following demand probabilities during the lead time, how much safety stock should be carried?
Demand During Lead Time (kg) Probability
0 ....................................................................... 0.1
100 ................................................................... 0.1
200 ................................................................... 0.2
140 ................................................................... 0.4
100 ................................................................... 0.2
Step by Step Answer:
Operations Management Sustainability and Supply Chain Management
ISBN: 978-0133764345
2nd Canadian edition
Authors: Jay Heizer, Barry Render, Paul Griffin