Because of its high costs and national shortage in supply, Dana Farber Institute closely monitors the quantity of Corticosteroids, a lymphoma fighting drug, in this stockroom. Continuous review system has been used. Develop an inventory management plan based on the following data: Item unit cost: $2500 Standard deviation of weekly demand quantity: 25 Ordering Cost: $250 per order Lead time: 2 weeks on average Holding cost: 5% of the unit cost per year Standard deviation of lead time length: 0.2 Annual Demand (in 52 weeks): 27,300 Service probability: 95%
a) How much should be ordered each time?
b) How much is the safety stock quantity?
c) What is the reorder point (i.e. the inventory quantity that triggers new orders)?