Your firm uses a continuous review (Q) system and operated 52 weeks per year. One of the items has following characteristics:
Demand = 20,000 units/year
Ordering cost = $40/order
Holding cost = $2/unit/year
Lead Time = 2 weeks
Cycle Service Level = 95%
Demand is normally distributed with a standard deviation of weekly demand of 100 units. Current on-hand inventory is 1040 units with no scheduled receipts or backorders.
1. Find the Safety Stock (SS).
2. Find the annual cost of holding cycle inventory and placing orders.
3. A withdrawal of 15 units just occurred. Is it time to reorder? If so, how much should be ordered?