Find the level of the safety stock if the cycle service level is to stay at 98%.
| Annual Demand | 2,500 |
| Holding cost per bracket per year | $1.50 |
| Order cost per order | $18.75 |
| Lead time | 10 days |
| Working days per year | 250 |
The Economic Order Quantity is 250 units.
The average inventory is 125 units.
The Inventory Holding Cost is $187.50.
10 orders would be made each year, at an annual order cost of $187.50.
The Total Annual Cost of managing the inventory is $375.00 per year.
The time between orders is 25 days.
The average WEEKLY demand is 50 units with a standard deviation of 12 units.
QUESTIONS:
1) Henry’s proposal and a periodic review system where orders are placed regularly every four weeks.
- Find the level of the safety stock if the cycle service level is to stay at 98%.
- Find the number of orders per year and the annual ordering cost.
- Find the average order size and the annual cost of holding the cycle inventory (excluding the safety stock).
- Find the total annual inventory cost of this system, including the cost of the merchandise and the holding cost of the safety stock.
- You are currently at a reorder point and find that there are exactly 130 units left in stock. How many units should you order?
- Determine the probability that you experience a stockout situation before the current order is delivered.
