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A regional distributor purchases discontinued appliances from various suppliers and then sells them on demand to retailers in the region. The distributor operates 5 days per week, 52 weeks per year. Only when it is open for business can orders be received. Management wants to reevaluate its current inventory policy. The following data are estimated for the mixer:
Average daily demand 100 mixers
Replenishment lead time 3 days
Standard deviation of demand (daily) 30 mixers
Desired service level 95%
Ordering cost $35/order
Holding cost $9/unit/year
What are the best order quantity Q?
What is the best reorder point?
If on-hand inventory is 400 mixers, there are 30 mixers of backorders and no open orders pending, should a new order be placed?
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