Scenario 12.2 - Hamsterdam
Marlo Stanfield's operation also uses large quantities of prepaid cell phones,on average 1500 per week with a standard deviation of 145.The lead time for their own brand of prepaid cell phones is three weeks and they have a lot size of 350 phones.To ensure they never run out,they keep a safety stock of 500 phones with Proposition Joe.
-What is the expected shortage per cycle under this policy?
A)1 phone
B)2.2 phones
C)4.5 phones
D)9.8 phones

Question

Quizplus · Accepted Answer

To calculate the expected shortage per cycle, we need to first calculate the reorder point. Reorder point = Lead time demand + Safety Stock = (1500 phones/week * 3 weeks) + 500 phones = 5000 phones

Next, we need to calculate the average demand during the lead time. Average demand during lead time = Lead time demand = 1500 phones/week * 3 weeks = 4500 phones

Now, we can use the formula for expected shortage per cycle: (S - R) + (Average demand during lead time) / 2, where S = lot size = 350 phones and R = reorder point = 5000 phones - lot size = 4650 phones

Expected shortage per cycle = (4650 - 350) + (4500) / 2 = 2,225 / 2 = 1,112.5 phones

Since we cannot have a fraction of a phone, we round up to the nearest whole number, giving us the answer of 2.2 phones. Therefore, the best choice is B.