Example: Your firm uses a continuous review system, where inventory position of

Question

Example: Your firm uses a continuous review system, where inventory position of an item is updated after each transaction. The firm operates 52 weeks per year. One of the items has the following characteristics: ? Demand (R) = 19,500 units/year ? Ordering cost (S) = $25/order ? Holding Cost to hold one unit for 1 year (H) = $4 ? Replenishment lead-time (L) = 2 weeks ? Standard deviation of weekly demand = 120 units ? Target cycle service level = 95% How many should be ordered each time? How many orders per year (on average)? What should the Reorder-point be? Level of Safety Stock? Average Inventory? Expected Shortages per order cycle? Expected Shortages per year? Expected Fill Rate? Better Target Cycle Service Level than 95%?

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Example: Your firm uses a continuous review system, where inventory position of an item is updated after each transaction. The firm operates 52 weeks per year. One of the items has the following characteristics: ? Demand (R) = 19,500 units/year ? Ordering cost (S) = $25/order ? Holding Cost to hold one unit for 1 year (H) = $4 ? Replenishment lead-time (L) = 2 weeks ? Standard deviation of weekly demand = 120 units ? Target cycle service level = 95% How many should be ordered each time? How many orders per year (on average)? What should the Reorder-point be? Level of Safety Stock? Average Inventory? Expected Shortages per order cycle? Expected Shortages per year? Expected Fill Rate? Better Target Cycle Service Level than 95%?

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