What is the ordering policy

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Reference no: EM133688450

Question: A company advertises a 95 per cent cycle service level for all stocked items. Based on historical data the company estimates an item has a Normally distributed demand with mean 200 units a week and standard deviation of 20 units. The company works with a reliable supplier that guarantees a lead time of four weeks. The reorder and handling cost is S80. holding cost is S5 per unit per week.

(a) What reorder level should they use?

(b) If the lead time is unstable and follows a normal distribution with mean of four weeks and variance of one week, what is the ordering policy?

(c) If shortage cost is considered and it is S250 per unit per week. illustrate how to find the optimal reorder level and order quantity.

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Reference no: EM133688450

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