Mozer’s Garden Solutions has a chain of retail stores in the mid-west. Mozer’s o
ID: 343632 • Letter: M
Question
Mozer’s Garden Solutions has a chain of retail stores in the mid-west. Mozer’s orders hedge trimmers
from a wholesaler. Every year Mozer’s requires 9,000 hedge trimmers. The trimmers cost $250 per trimmer
from their wholesaler.
The estimated cost of ordering at the wholesaler and paying shipping fees is $200 per order: K = $200
The holding cost per hedge trimmer is estimated to be 10% of the cost of the trimmer h = 0.1 × $250 = $25
The EOQ for the hedge trimmers is 379 trimmers.
3a. Describe an appropriate ordering policy if the lead time (LT) for the hedge trimmers is constant at 3
months. Specify the amount that should be ordered at the ROL.
3b. If Mozer's guarantees a 95% in-stock rate, what should their Safety Stock of hedge trimmers be?
What is the total ROL = demand during lead time + Safety Stock?
The standard deviation of the monthly demand is 300.
For a 95% in-stock rate, the z value is 1.96.
Explanation / Answer
3.a The appropriate ordering policy in terms of Reorder level as follows :
Reorder point = Average monthly demand x Lead time ( months)
= ( 9000/ 12 ) x 3 months
= 2250
AMOUNT THAT SHOULD BE ORDERED AT REORDER LEVEL = 2250 HEDGE TRIMMER
3.b Z value of 95 % in stock rate = 1.96
Standard deviation of monthly demand = 300
Lead time = 3 months
Therefore, Standard deviation of demand during lead time
= Standard deviation of monthly demand x Square root ( Lead time )
= 300 x Square root ( 3 )
= 300 x 1.732
= 519.6
Safety stock = Z value x standard deviation of demand during lead time
= 1.96 x 519.6
= 1018.41 ( 1019 rounded to next higher whole number )
Total ROL = Demand during lead time + Safety stock = 2250 ( as calculated earlier)+1019 = 3269
TOTAL ROL = 3269
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