Daniel’s Auto Parts is a small wholesale distributor of automobile after-market items. For one particular part, an analysis of historical sales resulted in the distribution of daily demand shown below:

When a new supply of the part is ordered, the lead-time distribution is shown below (for example, if the lead time is three, the order arrives on the third day after the order is placed):

Other information obtained from company records includes the following:
1. Order cost is $25.00 per order.
2. Back order cost is $10.00 per stockout.
3. Unit storage cost is $0.75 per day.
Use the Inventory Simulation Excel template in MindTap to identify the best reorder point and reorder level that will result in the lowest average cost/day using a data table with 20 replications. It will require some trial and error to hone in on the best parameters. Start with the reorder point between five and ten, and the order quantity between ten and 20.

Transcribed Image Text:

Daily Demand 0 1 2 3 4 Probability 0.1770 0.0770 0.3850 0.2731 0.0879