What is the optimal order quantity the retailer should order

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Reference no: EM132241454

Weekly demand for DVD-Rs at a retailer is normally distributed with a mean of 1,000 boxes and a standard deviation of 150. Currently, the store places orders to the supplier, with a reorder point of 4,200 boxes. The order quantity to the supplier is fixed at 5,000 boxes. Replenishment lead time is 4 weeks, fixed order cost per order is $100, each box costs the retailer $10, and the inventory holding cost is 25% per year.

A) Given the reorder point value of 4,200 boxes, calculate the safety stock currently in place at the retailer?

B) If the retailer wants to achieve a 99% service level (use the z-value with one decimal, as in Table 13.4 on page 400 of the textbook), what should be the safety stock value?

C) With a safety stock of 300 boxes, what is the approximate service level (round to two decimals)?

D) Given the problem parameters, what is the optimal order quantity the retailer should order?

E) Under the current order quantity of 5,000 boxes and current reorder point of 4,200 boxes, what would be the order-up-to level S that the retailer should use as a baseline to calculate how much inventory to order when conducting a periodic review?

Reference no: EM132241454

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