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A golf specialty wholesaler operates 50 weeks per year. Management is trying to determine an inventory control policy for its 1-irons, which have the following characteristics:
Mean demand = 2000 units/year
Demand is normally distributed
Standard deviation of weekly demand = 20 units
Order cost = $72/order
Annual holding cost = $5/unit
Desired cycle-service level = 90%
Lead time = 4 weeks
Current on-hand inventory is 300 units, with no open orders and a backorder of 50 units.
Currently, the company uses a continuous review (s, S) policy.
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