Question
Base-stockModel:Consider two situationsspecializedvs. common component, both managed usinga base-stock inventory control policy with an in-stock probability of about 97.7%,corresponding to a z-value of z=2. In
Base-stockModel:Consider two situationsspecializedvs. common component, both managed usinga base-stock inventory control policy with an in-stock probability of about 97.7%,corresponding to a z-value of z=2. In the specialized situation, there are 5 special parts each with independent Normal demand during replenishment lead time (DDLT) with mean 100 and std.dev. 30. In the common component situation, the 5 special parts are replaced by one common part that can be used to satisfy the demand for each of 5 special parts. Replenishment lead for the common part and each specialized part is the same. Calculate the base-stock level, Rs,for each of the specialized components and the corresponding base-stock level, Rc, for the common component. Which systemspecialized or common component will carry lower total safety stock? Explain.
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