Arnie's Air Conditioners, Inc., manufactures a variety of heating and cooling equipment. The Super Cool model is one of the higher-demand items and is of particular interest because its manufactured cost is $600. Demand for the Super Cool is relatively constant, and demand data for the past 12 weeks is given here. The lead time to manufacture one order of Super Cool is 4 weeks. The holding cost percentage for Arnie's is 16 percent. The setup cost is $20 per order. The company operates 52 weeks per year.
Average Demand = 120 units/week a, = 15 units/week
a. Design a continuous review inventory management system for the Super Cool model and calculate the appropriate parameters to control two things: (1) when to order and (2) how much to order. Assume that Arnie's Air Conditioners wants to maintain an 86 percent cycle-service level.
b. What effect would increasing the cycle-service level to 94 percent have on customer service and inventory levels? Calculate the change in numerical terms, if appropriate.
c. What effect(s) would a decrease in the lead time from 4 weeks to 2 weeks have, assuming that the company maintains the 86 percent cycle-service level of part al