Managing Inventory: Intuition-Generating Problems

Abstract

This problem set introduces the concepts of order quantities and inventory tradeoffs, enabling students to develop intuition around the basic costs involved in inventory thinking. This can be used with the note “Managing Inventories: Fundamentals,” UVA-OM-1397. Excerpt UVA-OM-1487 Rev. Nov. 21, 2013 MANAGING INVENTORY: INTUITION-GENERATING PROBLEMS 1. Casey and the ATM Casey was always going to the ATM to get cash and complaining about the convenience fees. “I wonder if I should go a little less frequently,” thought Casey. How could Casey use inventory thinking to determine how much cash to withdraw? Casey's requirement for cash was $ 75 per week. Casey's opportunity cost of capital was 5% per year. Casey incurred a charge of $ 2.95 for each ATM transaction. 2. Lee Gets Gas . . .