Given the following information, formulate an inventory management system. The item is demanded 50 weeks a year.
Item cost $10.00 Standard deviation of
Order cost $250.00 weekly demand 25 per week
Annual holding cost (%) 33% of item cost Lead time 1 week
Annual demand 25,750 Service probability 95%
Average demand 515 per week
a. State the order quantity and reorder point.
See the attached file. Thanks
R Demand rate avg. (units per unit time) 25750
sR Demand rate std. dev. (units per unit time) 176.78 (converted to annual)
LT Leadtime avg. (time units) 0.02 (in terms of year = 1/50)
sLT Leadtime std. dev. (time units) 0
K Unit ordering/prod. cost ($ per order) $250.00 ...
This post shows how to calculate EOQ, lead time demand information, calculate the safety stock based on S.L. and reorder point