Relation between service level and shortage costs

Question

Assignment:

Question 1. Using Excel and the data provided in the case, work in your teams to answer to the actions presented:

1. Develop a way to estimate the holding, transaction (or fixed), and backorder costs.
2. Discuss the relationship between service level and shortage costs. How can this relationships be established quantitatively.
3. Develop a system that involves the continuous review approach for the inventory management. Use the example provided.
4. Give an overall recommendation and next steps
5. Discuss other areas of savings.