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6 year) Your firm uses a periodic review system for all SKUs clas- sified, using ABC analysis, as B or C items. Further, it uses
6 year) Your firm uses a periodic review system for all SKUs clas- sified, using ABC analysis, as B or C items. Further, it uses a continuous review system for all SKUs classified as A items. The demand for a specific SKU, currently classified as an A item, has been dropping. You have been asked to evaluate the impact of moving the item from continuous review to periodic review. Assume your firm operates 52 weeks per year; the item's current characteristics are: Demand (D) = 20,000 units/year Ordering cost (S) = $125.00/order Holding cost (H) = $3.00/unit/year Lead time (L) = 5 weeks Cycle-service level = 95 percent Demand is normally distributed, with a standard deviation of weekly demand of 64 units. a. Calculate the item's EOQ. b. Use the EOQ to define the parameters of an appropri- ate continuous review and periodic review system for this item. C. Which system requires more safety stock and by how much
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