Question: A manager must set up inventory ordering systems for three new items, the Gadget and the Widget. Gadget is ordered from a supplier and is

A manager must set up inventory ordering systems for three new items, the Gadget and the Widget. Gadget is ordered from a supplier and is delivered at once, while Widget is produced in-house in batches of fixed size. The company operates 52 weeks a year, five days per week, and demand for each item is normally distributed. The company uses a continuous inventory system for Gadgets and Widgets. The manager has gathered the following information about the items

A manager must set up inventory ordering systems

a. Compute the optimal order quantity for item Gadget. b. How many orders of item Gadget will be placed per year? c. What is the time between two consecutive orders of Gadget, in weeks? d. What should the safety stock be for item Gadget? e. Compute the optimal order quantity for Widget. f. When should the manager reorder item Widget? g. Determine the length of each production run of item Widget, in days. h. What is the maximum level of inventory for item Widget?

Average demand Standard deviation (weekly) (o) Unit cost (C) Production rate (p) Ordering cost/Setup cost (S) Annual holding cost percentage (i) Lead time (L) Service level (a) Review period (k) Gadget 6,000 units per year 50 units $18 $550 15% 3 weeks 99.5% Widget 10 units per week 20 units $200 100 units per day $2,650 15% 1 week 97%

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