Question: large electronics superstore sells a popular handheld computer. The store presently managesits inventory of this item with the following process: When the number of computers
large electronics superstore sells a popular handheld computer. The store presently managesits inventory of this item with the following process: When the number of computers in stockdrops to it places an order for to the manufacturer. is called the
reorder pointand is called theorder sizeThe amount of time to receive an ordervaries a bit, but can beapproximated by a normal distribution with a mean of days and a standard deviation of days.An examination of sales records at times when there are computers in stock shows that the timebetween purchases of a computer is hours on average with an exponential distributionThestore is open hours perday days per week.The store estimates thatduring the next months this demand pattern should remain steady.
Management wants to satisfy at least of the customer demand directly from thestoresinventorySubject to this,of course, managementwants to minimize its costs.In this case,thecosts are $ every time an order is placed regardless of its size and $ per day for every computer that is in inventory atthe stor aced regardless of its size and $ per day for everycomputer that is in inventory atthe store.Management wants to determine whether it shouldchange its reorder point and order size.
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