Answered: In many respects, the food inventory…

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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Question

In many respects, the food inventory decision for each
Celebrity cruise matches the single-period inventory model
described in this chapter. Consider the decision about chicken.
Suppose that Celebrity purchases chicken in bulk for $0.80 per
pound, and any chicken left over after a cruise is donated to
local food banks. Management estimates that a shortage penalty
of $1.00 per pound is incurred due to lost customer goodwill
from unsatisfied demand. If chicken demand for a 7-day
cruise is normally distributed with a mean of 3,000 pounds and
a standard deviation of 200 pounds, how many pounds should
be brought onto the ship?

Features Features Normal distribution is characterized by two parameters, mean (µ) and standard deviation (σ). When graphed, the mean represents the center of the bell curve and the graph is perfectly symmetric about the center. The mean, median, and mode are all equal for a normal distribution. The standard deviation measures the data's spread from the center. The higher the standard deviation, the more the data is spread out and the flatter the bell curve looks. Variance is another commonly used measure of the spread of the distribution and is equal to the square of the standard deviation.

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