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Pragati Engg Ltd has estimated the probability distribution of daily requirement and lead time for delivery for its main raw material: Daily requirement (no of
Pragati Engg Ltd has estimated the probability distribution of daily requirement and lead time for delivery for its main raw material:
Daily requirement (no of units) Probability Lead time for delivery (days) probability
30,0.1,
Daily requirement (no of units) | Probability | Lead time for delivery (days) | probability |
30 | 0.1 | 10 | 0.2 |
40 | 0.6 | 14 | 0.6 |
50 | 0.3 | 18 | 0.2 |
Given that Stockout cost is Rs 5,000 per unit of stockout, and Carrying cost is Rs 1,200 per unit. Calculate the optimum amount of Safety Stock and Reorder Point, so as to minimize the overall cost. (15 marks)
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