Distributed with standard deviation of weekly demand

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Reference no: EM132304578

Suppose that your firm uses a Periodic Review System and operated 52 weeks per year. One of the items has following characteristics:

Demand = 20,000 units/year

Ordering cost = $40/order

Holding cost = $2/unit/year

Lead Time = 2 weeks

Cycle Service Level = 95%

Demand is normally distributed with a standard deviation of weekly demand of 100 units. Current on-hand inventory is 1040 units with no scheduled receipts or backorders.

1. Calculate the P that gives approximately the same number of orders per year as the EOQ. Round down your answer to the nearest week.

2. Find the SS and T corresponding to the 95% service level.

3. Compare SS for the Q and the P system. Which one has a bigger SS. Explain why.

Reference no: EM132304578

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