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Q r policy with normal demand

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Q,R Policy with Normal Demand

Fry's electronics, a large electronics retailer, purchases 1TB hard disks and sells them to customers. The store operates on a continuous review inventory system.

  • Weekly demand for disk drives is independent and normally distributed with a mean of 50 and a standard deviation of 15.
  • Lead time is 2 weeks
  • Holding cost for a disk drive is $1/unit/week
  • Ordering costs are $400.00/order
  • Desired fill rate is 98.0%

(a) What order quantity and reorder point, (Q, R), should the distribution center use?

(b) What order quantity and reorder point, (Q, R), should the distribution center use if, instead of a fill rate of 98%, a penalty cost of p = $10/unit is used?

Reference no: EM132474477

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