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What is the optimum order quantity

Assignment Help Operation Management
Reference no: EM132817347

Topic - Inventory Management.

Question# 1: Demand for a chemical at a manufacturing plant can be approximated by a Normal distribution with a mean of 21 litres per week and a standard deviation of 3.5 litres per week. The plant sources the chemical from a local distributer. The plant manager desires a lead time service level of 90 percent. He has estimated the holding cost per litre to be $0.1 per year and the cost of an order to be $5. Lead time from the distributer is 2 days. The store is open seven days a week. [Consider 52 weeks in a year for the planning purpose.]

(a) What is the optimum order quantity? [Keep 2 decimal places.]

(b) What is the demand during the lead time?

(c) What is the safety stock consistent with the desired lead time service level? [Keep 2 decimal places.]

[Note: lead time = 2 days = 2/7 week]

(d) What is the reorder point? [Keep 2 decimal places.]

Reference no: EM132817347

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