Travelling barriers start to soften around the world, Pluma, a seller of travelling accessories, has seen a peak on the demand of their most recently incorporated product, the Ocean travel pillow. The Ocean pillow is equipped with H9-series system for white noise generation and memory foam to provide the most comfortable support.

Being in charge of inventory management, you need to define your (s,Q) policy for the year to come. Your colleague Ms. Peterson provides you with the forecasted annual demand which is of 1750 with an RMSE of 166. You can assume that the demand is normally distributed.

After checking with the procurement and customer service teams, you gather the following information about the product and its supply:

• Average lead time: 17 days
• Cost to place an order: $7 per order
• Ocean pillow cost: $26 per unit
• Ocean pillow selling price: $110 per unit
• CSL: 94%

You also know that the annual inventory holding cost is 10%. For planning purposes, consider that 1 year has 350 days.

Assuming that the order quantity for Ocean pillows is set at Q= 97, answer the following questions:

1) What is the reorder point (s) you would recommend?

2) What would be the Item Fill Rate?

3)Under the scenario presented in Question 1, what's the expected annual cost of carrying the safety stock?

4) While taking SC1x you learned about the (R,S) policy and are considering implementing it. Ms. Peterson meets with the operational team and informs you that, apparently, ordering every 30 days is the best option. If that was the case,

What would be the Q (average replenishment order quantity) if you implement the (R,S) policy?

5)What is the order-up-to-point quantity (S) you should set for this replenishment model to maintain a CSL of 94%

6)Considering the (R,S) policy from Question 3, what would be your total inventory holding cost (include only cycle stock and safety stock costs)?

Answer rating: 100% (QA)

Lets solve each question step by step 1 Reorder Point s s textDemand during lead time textSafety stock s textLead time demand ZtextStandard deviation ... View the full answer