Smallville Bus System provides public transportation to the residents of Smallville. The maintenance department manages 1,000 buses and faces annual demand for 2,166 tires. The order cost is $50 per order, and the holding cost is $6 per tire. The lead time for an order is 2 weeks, and the standard deviation of demand is 7 tires per week.
a. What is the optimal order quantity of tires?
b. What is the optimal number of orders per year?
c. What is the reorder point if Smallville desires a cycle-service level of 50 percent?
d. What value of z should be used if Smallville wishes to achieve a cycle-service level of 92 percent?
e. What should the reorder point be? How much safety stock of tires does this provide?