Jack Neubauer is a candy distributor. He purchases cases of Altoids mints from the manufacturer and uses
Question:
Jack Neubauer is a candy distributor. He purchases cases of Altoids mints from the manufacturer and uses a (Q,R) policy to manage his inventory. He orders a batch of 4,160 cases whenever his inventory level hits 2,200. The batch size of 4,160 cases is optimal but the re-order point of 2,200 is not. Weekly demand is normally distributed with a mean of 500 cases and a standard deviation of 80. It takes 4 weeks to receive a shipment from the manufacturer. The cost to hold one case is $300 per year. He estimates a marginal shortage cost of $85. Assume 50 weeks per year.
(a) The current system does not provide the optimal service level. What service level is Jack providing?
(b) What are the optimal costs of shortage and excess?
Probability and Statistical Inference
ISBN: 978-0321923271
9th edition
Authors: Robert V. Hogg, Elliot Tanis, Dale Zimmerman