Reference no: EM132179735

Ohmbots is a robotic toy retail shop. They buy large amounts of robotic toys from a manufacturer in China. Genzo, the proprietor of Ohmbots, wants to make sure that he never runs out of toy robots. Genzo places an order every other month, and orders enough to raise the inventory to 5 months of supply. So if the inventory at start of the month is only 1.5 months of supply, then Genzo will order 3.5 months of supply that month. The robot are bought from China for $11 each, and sold for $30 each. The replenishment lead time is two months. Monthly demand is approximately normally distributed with mean 140 and standard deviation 85. Assume 10% annual holding cost rate.

1. How many toy robots, on average, would you expect Genzo to order at each occasion?

2. How much safety stock is there in Genzo's ordering policy?

3. What is the probability that whenever Genzo places an order, he will run out of inventory before the order arrives?

Write in decimals, NOT in percentages. Round to the 3rd decimal point.

4. Suppose Genzo wants to have less than 1% probability of stocking out with each order occasion. What is the minimum amount of base stock (B) to achieve that goal?

5. Genzo thinks having a safety factor of 1.7 is sufficient, as it has less than 5% chance to stock out. In this case, what is the annual holding cost?

6. What is the fill rate if Genzo decides on a policy with a safety factor of 1.7?

Write the answer in decimals, NOT in percentage. Round to 3 decimal points.