Calculate the annual savings in inventory carrying cost

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Reference no: EM132207051

Given this information for a typical item that is sourced from a supplier: Average demand=350 unites/week Average Lead Time=4 weeks Standard deviation of weekly demand=60 units Standard deviation of lead time=60 units Purchase cost per unit=$300 Annual inventory carrying cost percentage=25% The demand and lead time are distributed normally A. determine the safety stock needed to attain a 3% risk of stockout B. Determine the reorder point that will provide a 94% service level C. What is the most effective course of action that can be taken to reduce the required safety stocks in part (a), without reducing the desired service level? please justify your answer D. the company is considering sourcing the above item from a more agile and reliable supplier with higher purchase cost per unit. This new supplier has a lead time of 2 weeks, and its delivery times are very reliable. Calculate the annual savings in inventory carrying cost (in dollars) due to the need for less safety stocks as a result of purchasing from the new supplier (to achieve the same 3% risk of stockout as part a)

Reference no: EM132207051

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