2. You have been the inventory manager at Malmart Distribution Center. You have estimated that the annual demand for passenger car tires is 200,000 units. Placing an order costs $300. Cost to hold a tire is $3 per year. Cost per tire is $70.

(a) How much (Q*) and how often do you need to order and fulfill the demand?

Q*: _________ T*: _________

(b) At the end of your first year of managing, you realize that the demand is variable. However, the average annual demand is still 200,000 with a standard deviation of 5.6 tires per day. The tires supplier cannot deliver the products on the same day. The average lead time is now 20 days with a standard deviation of 4.1 days. You consider a 95% Service Level to satisfy customers. What is the Reorder Point (ROP)?

ROP: _________

(c) You also want to test OUT model. The review process, T, is 50 days. Assume that the onhand inventory is 10,000 tires. What is the OUT inventory level and the Order Quantity (Q)? (Hint: Use the information in Part b to find the value for the remaining parameters.)

OUT: _________Q: _________