The Super Discount store (open 24 hours a day, every day) sells 8-packs of paper towels, at the rate of approximately 420 packs per week. Because the towels are so bulky, the annual cost to carry them in inventory is estimated at $.50 per pack. The cost to place an order for more is $20 and it takes four days for an order to arrive.
Find the optimal order quantity.
What is the reorder point?
How often should an order be placed?
This solution provides process of identifying optimal order quantity, reorder point and how frequently order should be placed given demand, annual carrying cost, ordering cost and lead time