Retailers Warehouse (RW) is an independent supplier of household items to department stores. RW attempts to stock enough items for a 98 percent service probability. A stainless steel knife set is one item it stocks. Demand (2,400 sets per year) is relatively stable over the entire year. Whenever new stock is ordered, a buyer must ensure that numbers are correct for stock on-hand and then phone in a new order. The total cost involved to place an order is about $5. RW figures that holding inventory in stock and paying for interest on borrowed capital, insurance, and so on, add up to about $4 holding cost per unit per year. Analysis of the past data shows that the standard deviation of demand from retailers is about four units per day for a 365-day year. Lead time to get the order is seven days. What is the economic order quantity? Note: Round your answer to the nearest whole number.   What is the reorder point? Note: Use Excel's NORM.S.INV() function to find the z value. Round z value to 2 decimal places and final answer to the nearest whole number.

Practical Management Science
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Author:WINSTON, Wayne L.
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Retailers Warehouse (RW) is an independent supplier of household items to department stores. RW attempts to stock enough items for a 98 percent service probability.

A stainless steel knife set is one item it stocks. Demand (2,400 sets per year) is relatively stable over the entire year. Whenever new stock is ordered, a buyer must ensure that numbers are correct for stock on-hand and then phone in a new order. The total cost involved to place an order is about $5. RW figures that holding inventory in stock and paying for interest on borrowed capital, insurance, and so on, add up to about $4 holding cost per unit per year.

Analysis of the past data shows that the standard deviation of demand from retailers is about four units per day for a 365-day year. Lead time to get the order is seven days.

  1. What is the economic order quantity?

    Note: Round your answer to the nearest whole number.

     
  2. What is the reorder point?

    Note: Use Excel's NORM.S.INV() function to find the z value. Round z value to 2 decimal places and final answer to the nearest whole number.

     
 
 
 
 
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