Homework answers / question archive / 11

11

Operations Management

Share With

11. In an effort to improve customer service and reduce the cost of

inventory, the Thanskavel Company invested in a number of lean manufacturing initiatives. One result of these investments was a reduction of the manufacturing lead time for the company's specialty product, Eggsbar, from six weeks to four weeks. A study of Eggsbar disclosed that the demand averages 200 units per week, with a standard deviation of 22 units. The demand from one week to the next week was found to be independent.
a. What was the mean and standard deviation of the demand during manufacturing lead time for
this product before and after the initiatives?
b. Thanskavel has a policy of holding safety stock of finished goods inventory in the amount of 2.5 times the standard deviation of demand during manufacturing lead time. In the past, this amounted to $10,000 of safety stock inventory for this product. What reduction in safety stock for this product resulted from the reduction of the manufacturing lead time?