Calculate the average annual cost for this inventory system. If the lead time from the order to delivery is 2 days, what is the reorder point in terms of the respirator’s stock level?
A medical facility’s demand for N95 respirators and disposable gloves is deterministic and stable at a rate of 20 respirators per day and 100 gloves per day. The distributor charges $20 per pack of 20 respirators and $10 for a pack of 25 gloves. The distributor offered the healthcare facility the following plan: whenever the medical facility places a single order for both N95 respirators and gloves, the distributor will package one pack of respirators together with two packs of gloves to minimize shipping volume. The remainder of the order of gloves will be sent in the second shipment (without any extra shipping cost), which will be timed so that the healthcare facility receives the second shipment just before it runs out of gloves inventory. The shortages are not allowed. The fixed cost of placing an order is $10 and the holding cost rate is a 20% annual interest rate (assume 365 days per year).
- Calculate the average annual cost for this inventory system.
- If the lead time from the order to delivery is 2 days, what is the reorder point in terms of the respirator’s stock level?
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