Maintaining Safety Stock
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6-37, The demand for barbecue grills has been fairly large in the past several years, and Home Supplies, Inc., usually orders new barbecue grills five times a year. It is estimated that the ordering cost is $60 per order. The carrying cost is $10 per grill per year. Furthermore, Home Supplies Inc., has estimated that the stockout cost is $50 per unit. The ROP is 650 units. Although the demand each year is high, it varies considerably. The demand during the lead time is shown in the following table:
The lead time is 12 working days. How much safety stock should Home Supplies, Inc., maintain?
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Solution Summary
This solution helps with calculations involving safety stock.
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