Question: A Nike import distribution center ( hereafter refers to as IDC ) supplies a certain product to a Nike online fulfillment center ( hereafter referred
A Nike import distribution center hereafter refers to as IDC supplies a certain product to a Nike online fulfillment center hereafter referred to as OFC The manager at OFC estimates that the demand for this product follows a normal distribution with an average demand of per day and standard deviation of per day. The manager also estimates that for a increase or decrease in service level during the lead time the average annual sales will increase or decrease by The rest of the information regarding this product are listed below:
Average daily demand: units per day
Standard deviation of demand: units per day
Cost of goods sold at OFC: $ per unit.
Product margin: $ per unit.
Inventory carrying cost percentage: for all inventory either at IDC, OFC, or intransit
Order cost at OFC: $ per order.
Current lead time from IDC to OFC: days
Assuming the manager in OFC uses a reorder point inventory control policy.The IDC orders the product from an Asian manufacturer with a lead time of days. To minimize its shipping cost, IDC orders units each time. Assuming OFC keeps the same order behavior that is orders units each time from IDC and maintains a service level of On the other hand, IDC needs to maintain a service level of during the lead time, what is the average inventory level at IDC alone?
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