Abilene Auto Parts, a retailer of general maintenance and after-market automotive products, desires to re-build their brand around service and availability. Traditionally, they have committed to having parts in stock for their customers 80%of the time. Use the date below to determine:

(a) Their current economic order quantity(using EOQ).

 (b) Their current re-order point (ROP) using the 80% service level.

To support the re-branding effort, the VP of marketing at Abilene has asked you to determine the incremental costs of increasing the cycle-service level to 99%. Given the information below regarding replacement headlight bulbs, determine:

c) The difference in TOTAL annual cost of the replacing the80%policy with one calling for a 99%service level (i.e., the incremental costs asked for by the VP of marketing).

(d) The CEO does not want this initiative to increase costs, so the VP of operations would like to know if supply chain improvements can adequately lower costs in support of the branding initiative. If, through these improvements, the average lead time could be reduced to 4 days, the standard deviation of lead time reduced to 1 day, and ordering costs to $35, by how much would this offset (or not) the difference in annual costs of a shift to a 99% service level (calculated in part c)?