2. You have been the inventory manager at Malmart Distribution Center. You have estimated that the annual demand for passenger car tires is 200,000 units. Placing an order costs $300. Cost to hold a tire is $3 per year. Cost per tire is $70.

(a) How much (Q*) and how often do you need to order and fulfill the demand?

Q*: _________ T*: _________

(b) At the end of your first year of managing, you realize that the demand is variable. However, the average annual demand is still 200,000 with a standard deviation of 5.6 tires per day. The tires supplier cannot deliver the products on the same day. The average lead time is now 20 days with a standard deviation of 4.1 days. You consider a 95% Service Level to satisfy customers. What is the Reorder Point (ROP)?

ROP: _________

(c) You also want to test OUT model. The review process, T, is 40 days. Assume that the on- hand inventory is 15,000 tires. What is the OUT inventory level and the Order Quantity (Q)? (Hint: Use the information in Part b to find the value for the remaining parameters.) OUT: _________Q: _________