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Standard deviation of yearly demand = 10,400 unitsAverage lead time = 5 weeks
The Hastings Company is a nation-wide wholesaler for small electronic devices. One of its most popular items is a new GPS unit called the WAMI-1000. The company operates 365 days (52 weeks) in a year. Hastings has gathered the following information:
Average demand = 52,000 units/year
Standard deviation of lead time= 1.5 weeks
Risk of stockouts= 15%
a) What is the reorder point for the WAMI-1000?
b) If the lead time standard deviation can be reduced from 1.5 weeks to 1, how much is safety stock reduced by this change?
c) If the lead time would be constant and equals to 6 weeks (instead of variable lead time), what is the reorder point of the company with 15% risk of stockouts?
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