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5 The Hardware Warehouse is evaluating the safety stock policy for all its items, as identified by the SKU code. For SKU M4389, the company always orders 80 units each time an order is placed. The daily demand is constant, at 5 units per day the lead time is normally distributed, with a mean of three days and a standard deviation of two days. Holding cost is $3 per unit per year. A 95% service level is to be maintained. (a) What is the standard deviation of demand during the lead time? (b) How much safety stock should be carried, and what should be the reorder point? (c) What is the total annual holding cost? Safety stock - Normal distribution Model: Daily demand and its standard deviation are given Data Average daily demand Standard deviation of daily demand, o Lead time days Service level (% of demand met) UNUMI 3 Inventory 4 Seit a model and then the data in the shadow. The colon the bottom 5 6 Model: Demand during leadtime and its standard deviation given 7 3 Data 9 Average demand during lead time, 10 Standard deviation of 11 Service level% of demand met 12 13 14 Results 15 Z-value ANUMI 16 Safety stock UNUMI 17 18 19 20 21 22 Models Either daily demand, lead time or both are variable 23 24 Data 25 Average dally demand 26 Standard deviation of daily demand 27 Average lead time in days) COST 28 Standard deviation of lead time, CES FEST 29 Service level of demand met) 30 31 Results 22 z-value NUM! 33 Average demand during lead time 5-30 Results Z-value Average demand during lead time Standard deviation of demand during lead time, dar Safety stock Reorder Point 0.001 #NUMI UNUMI Enter Oif demand is constant Enter of lead time is constant 1509 5 The Hardware Warehouse is evaluating the safety stock policy for all its items, as identified by the SKU code. For SKU M4389, the company always orders 80 units each time an order is placed. The daily demand is constant, at 5 units per day the lead time is normally distributed, with a mean of three days and a standard deviation of two days. Holding cost is $3 per unit per year. A 95% service level is to be maintained. (a) What is the standard deviation of demand during the lead time? (b) How much safety stock should be carried, and what should be the reorder point? (c) What is the total annual holding cost? Safety stock - Normal distribution Model: Daily demand and its standard deviation are given Data Average daily demand Standard deviation of daily demand, o Lead time days Service level (% of demand met) UNUMI 3 Inventory 4 Seit a model and then the data in the shadow. The colon the bottom 5 6 Model: Demand during leadtime and its standard deviation given 7 3 Data 9 Average demand during lead time, 10 Standard deviation of 11 Service level% of demand met 12 13 14 Results 15 Z-value ANUMI 16 Safety stock UNUMI 17 18 19 20 21 22 Models Either daily demand, lead time or both are variable 23 24 Data 25 Average dally demand 26 Standard deviation of daily demand 27 Average lead time in days) COST 28 Standard deviation of lead time, CES FEST 29 Service level of demand met) 30 31 Results 22 z-value NUM! 33 Average demand during lead time 5-30 Results Z-value Average demand during lead time Standard deviation of demand during lead time, dar Safety stock Reorder Point 0.001 #NUMI UNUMI Enter Oif demand is constant Enter of lead time is constant 1509