Your firm uses a continuous review system and operates52 weeks per year. One of the SKUs has the followingcharacteristics.Demand 1D2 = 20,000 units>yearOrdering cost 1S2 = $40>orderHolding cost 1H2 = $2>unit>yearLead time 1L2 = 2 weeksCycle@service level = 95 percentDemand is normally distributed, with a standard deviation ofweekly demand of 100 units.Current on-hand inventory is 1,040 units, with no scheduledreceipts and no backorders.a. Calculate the item’s EOQ. What is the average time, inweeks, between orders?b. Find the safety stock and reorder point that provide a95 percent cycle-service level c. For these policies, what are the annual costs of (i) holdingthe cycle inventory and (ii) placing orders?d. A withdrawal of 15 units just occurred. Is it time to reor-der? If so, how much should be ordered?
Your firm uses a continuous review system and operates
52 weeks per year. One of the SKUs has the following
characteristics.
Demand 1D2 = 20,000 units>year
Ordering cost 1S2 = $40>order
Holding cost 1H2 = $2>unit>year
Lead time 1L2 = 2 weeks
Cycle@service level = 95 percent
Demand is
weekly demand of 100 units.
Current on-hand inventory is 1,040 units, with no scheduled
receipts and no backorders.
a. Calculate the item’s EOQ. What is the average time, in
weeks, between orders?
b. Find the safety stock and reorder point that provide a
95 percent cycle-service level
c. For these policies, what are the annual costs of (i) holding
the cycle inventory and (ii) placing orders?
d. A withdrawal of 15 units just occurred. Is it time to reor-
der? If so, how much should be ordered?
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