Crew Soccer Shoes Company is considering a change of their current inventory control system for soccer shoes. The information regarding the shoes is given below.
Average demand ............. = 250 pairs/week
Lead time ..................... = 3 weeks
Order cost ................. = $75/order
Unit cost ................ = $21.50
Carrying charge rate ............. = 0.20
Desired service level ............ = 95%
Standard deviation of weekly demand .. = 40
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 be to have a 95% service level? Explain how the system will operate.