Question: Target continuously reviews its inventory levels for study desks. For one particular popular brand, when the inventory level reaches the reorder point, it orders 200
Target continuously reviews its inventory levels for study desks. For one particular popular brand, when the inventory level reaches the reorder point, it orders 200 desks on each order.Demand is Normally distributed with the mean of 6,400 desks per year (133 per week) with a standard deviation of 20 per week. The supplier has a 4-week lead time and it costs $200 per desk for Target to purchase these study desks. The per-order cost is $90 and the holding cost is based on a 20% annual interest rate. You can assume that Target owns the chairs when they are delivered and the desired service level is 95%. (a) Calculate the necessary variable(s) (i.e., order quantity and reorder point) for Targets optimal inventory policy of this popular brand desks. [6 points] (b) What is the safety stock level with this optimal inventory policy? [1 points] (c) What is the expected number of replenishment cycles per year with this optimal inventory policy? [2 points] (d) What is the expected cost of ordering per year with this optimal inventory policy? [2 points] (e) What is the average inventory and the expected annual holding cost this optimal inventory policy? [3 points]
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