A product has a reorder point of 110 units,and is ordered four times a year on average.The following table shows the historical distribution of demand values observed during lead time.
Managers have noted that stockouts occur 30 percent of the time with this policy,and they question whether a change in inventory policy,to include some safety stock,might be an improvement.The managers realize that any safety stock would increase the service level,but they are worried about the increased costs of carrying the safety stock.Currently,stockouts are valued at $20 per unit per occurrence,while inventory carrying costs are $10 per unit per year.What is your advice? Do higher levels of safety stock add to total costs,or not? What level of safety stock is best?
Definitions:
Motivation
the psychological force that drives an individual to take action towards achieving a goal.
Group Development
The process through which a group progresses over time, typically moving through stages of forming, storming, norming, performing, and adjourning.
Variable Factors
Elements or conditions that can change and affect the outcome of a situation or research.
Task Groups
Teams of people assembled to accomplish specified objectives, each member contributing their unique expertise towards the collective goal.
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