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Assignment:
John, the inventory manager at the Challenger branch in Orchard, has been tasked to manage the inventory of Samsung TVs. The average weekly demand for Samsung TVs is 350 units. The unit cost is $380, the ordering cost is $40, and the holding cost rate is 19% of the unit price. The replenishment lead time is 21 days.
(a) Calculate the optimal EOQ, total annual cost, reorder point, the number of orders per year, and the time between orders.
(b) Assume the weekly demand is normally distributed with a mean of 350 and the standard deviation is 100. Find the safety stock and reorder point to satisfy 95% probability of not stocking out during the lead time. Suppose Aman is asked to reduce the safety stock of Samsung TVs by 70 units. If this is done, what will the new service probability be?
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