Target cycle service level: 97%

Product lead time: 2 weeks

we have 325 on hand, no backorders

shipping lot size for orders: 1200

Product selling price: $10.99

Profit margin: 45%

Holding cost: 24% of product value

Warehouse was built for 1.5 million

fixed out of pocket cost of ordering supplies for making product: $20

Below is the data on the observed demand for this part for weeks 11 to 21 (We don't have observed demand data for this part for weeks 1-10 since this is a new product that is introduced in week 11) assume 52 weeks in a year:

Question:

1. What would be your plan for inventory ordering strategy (i.e. how much to order)? (8 points)
2. What would be the safety inventory and reorder point? (8 points)
3. What would be the total annual costs for this proposed inventory plan? (8 points)
4. How would the current and proposed plans compare in terms of cost (while recognizing all the relevant costs)?
5. By how much do your recommendations for this item impact annual cycle inventory and safety stock?

Week Actual Demand 11 18 12 33 13 53 14 54 15 51 16 53 17 50 18 53 19 54 20 49 21 52 Week Actual Demand 11 18 12 33 13 53 14 54 15 51 16 53 17 50 18 53 19 54 20 49 21 52