You are rethinking your inventory policy of your white tableware, a pretty standard product sold in boxes
Question:
You are rethinking your inventory policy of your white tableware, a pretty standard product sold in boxes of 24.
You pay your suppliers $10 per box. The lead time for receiving an order is 2 weeks. Your company take ownership of the boxes (white tableare) the moment they leave the supplier's facility. The ordering cost is $100 per order and the holding cost is 15% per year.
The annual demand for the white tableware (in boxes) is normally distributed with a mean of 1941 and a standard deviation of 399. (Assume 48 weeks in a year)
You and your team have found two different inventory policies, which is a (s, Q) system:
Policy 1: (s1, Q1) : (50,130)
Policy 2: (s2, Q2) : (75,100)
What would be the inventory costs associated with the policies?
Operations management processes and supply chain
ISBN: 978-0136065760
9th edition
Authors: Lee J Krajewski, Larry P Ritzman, Manoj K Malhotra