If the retailer orders a demand of Q = 10,800 units of masks in March, what would be the service level? Also, if the retailer is considering an order policy in which the safety stock level is SS = 25 units of masks, what would the corresponding reorder level
At a recent manufacturing workshop, XYZ, Incorporated explained that demand for disposable masks increase rapidly in March 2020 when quarantine mandates first took effect. At the time, retailers could only place a single order to cover demands through the end of the summer.
A certain retailer purchased disposal masks from a supplier at a cost of $20 per unit and sold them for $30 per unit. By the end of summer, demand for masks subsided considerably and all masks that weren't sold during the summer could be sold at a discounted price of $18 per unit. The retailer estimated that demand between March and August would be
With, supply chains becoming more stable since March 2020, the retailer is currently in the process of establishing a contract with a disposable mask supplier. The supplier has agreed to sell masks to the retailer for $18 per unit and will make deliveries any time the supplier places an order for a cost of $100 per delivery (the delivery cost is independent of the size of the order). The supplier's lead time is stable at 3 days.
On the demand side, estimates are much more conservative compared to the March-August timeframe: demand is assumed to be normal with mu = 1200 and sigma = 60 units per month. Other cost includes a holding cost of $2.50 per unit per month and a back-order cost of $29 per unit per month. The number of workdays each month is 24.
Question:
If the retailer orders a demand of Q = 10,800 units of masks in March, what would be the service level?
Also, if the retailer is considering an order policy in which the safety stock level is SS = 25 units of masks, what would the corresponding reorder level
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