Crew Soccer Shoes Company is considering a change in its curent inventory control system for soccer shoes. The information regarding the shoes is as follows:
Average Demand: 200 pairs/week
Lead Time: 3 weeks
Order Cost: $65/order
Unit Cost: $20
Carrying Charge Rate: 0.20
Desired Service Level: 95 percent
Standard Deviation of Weekly Demand: 50
Number of weeks per year: 52
The company decides to use a fixed-order-quantity system. What is the economic order quantity? What should be the reorder point to have a 95 percent service level? Explain how the system will operate.