Determine order quantity also determine reorder point

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Reference no: EM1379822

Q. This is my homework problem for Operations also Supply Chain Management this week; can you please help me figure out how to calculate this?

It is your responsibility, as new head of automotive section of Nichols Department Store, to ensure that reorder quantities for various items have been correctly established. You decide to test one item also choose Michelin tires, XW size 185 X 14 BSW. A perpetual inventory system has been used, so you examine this as well as or records also come up with following data:

Cost per tire $35 each
Holding cost 20 percent of tire cost per year
Demand 1,000 per year
Ordering cost $20 per order
Standard deviation of daily demand 3 tires
Delivery lead time 4 days

Because customers generally do not wait for tires but go elsewhere, you decide on a service probability of 98 percent. Assume demand occurs 365 days per year.

a. Determine order quantity also determine reorder point.

Reference no: EM1379822

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