For SKU A3510 at the Hardware Warehouse, the order quantity has been set at 150 units each
Question:
For SKU A3510 at the Hardware Warehouse, the order quantity has been set at 150 units each time an order is placed. The daily demand is normally distributed, with a mean of 12 units and a standard deviation of 4. It always takes exactly 5 days for an order of this item to arrive. Holding cost has been determined to be $10 per unit per year. Due to the large volume of this item sold, management wants to maintain a 99% service level.
(a) What is the standard deviation of demand during the lead time?
(b) How much safety stock should be carried, and what should be the reorder point?
(c) What is the total annual holding cost?
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Lead time is constant while demand is normally distributed a ...View the full answer
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Related Book For 
Quantitative Analysis for Management
ISBN: 978-0132149112
11th Edition
Authors: Barry render, Ralph m. stair, Michael e. Hanna
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