The Polybob Company is looking at total inventory costs for some of their "A"

items in inventory. They cycle count all the "A" items four times a year, and given that they use only skilled people, they estimate that each "A" item costs an average of $0.12 in labor costs to cycle count. They currently use a customer service level of 99% (z = 2.33) to establish safety stock, but are considering moving to 90% (z = 1.29). One product they are evaluating has an item cost of $53.50, an annual demand of 1,500, and a weekly standard deviation of demand of 6.

They recognize an order cost of $21 per order, and a holding cost of 23% per year. The replenishment lead time is 3 weeks. Using a cost analysis only, should they change the customer service level or not? What other considerations should be made before making the final decision?