Reference no: EM131794397

Toledo Grocers is planning to hire an expert (like you) to study their inventory and make recommendations. You are given the following data for Bulk mixed nut to demonstrate your knowledge and use it as a sample to earn their business. You are asked to compare the two approaches to inventory management: Continuous review and periodic review: Use both approaches to evaluate the cost and recommend a method for Toledo Grocers. Data given below. Distribution of Daily demand Normal Mean 600 pounds per day Standard Deviation of daily demand 90 pounds Holding cost 0.003 per pound per day Ordering cost 360 Lead time 4 days Service level Desired 85% Review period (when using periodic review) 20 days Number of days per year 365 On hand Inventory at the time of review 1450 Continuous review system Formula used (with numbers substituted for variables) Value obtained EOQ Mean lead time demand s.d. Lead time demand Z value for a service level of 85% Safety stock Reorder Level Total expected ordering cost per year Total expected holding cost per year Total expected total cost per year New SS, if SS is reduced by 50 units New reorder level New Z value New service level Periodic review system Formula used (with numbers substituted for variables) Value obtained Mean demand during (lead time + review period ) s.d. of demand during (lead time + review period ) Z value for a service level of 85% Safety stock Order up to Level (also called av. Demand during the vulnerable period +safety stock) Order quantity if on hand inventory as given Total ordering cost per year.