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AdvanceAuto is a retailer of aftermarket automotive parts. Their store in Cary is one of the biggest in the USA. The store manager needs your
AdvanceAuto is a retailer of aftermarket automotive parts. Their store in Cary is one of the biggest in the USA. The store manager needs your help in determining the optimal ordering policy for DEF (Diesel Exhaust Fluid) since all trucks at FedEx Ground Warehouse at Cary buy the DEF from AdvanceAuto. This item has a steady demand of 450 DEF boxes per month. AdvanceAuto pays $8 per DEF box and approximates its ordering costs at $200 per order. The annual holding cost for one unit of inventory is estimated to be 20% of the unit cost. a) Determine the Economic Order Quantity, the time between the placement of orders (in months), and the total relevant annual cost (i.e., sum of holding and ordering costs) for the DEF. b) The replenishment lead time is 5 days. Calculate the reorder point, assuming that AdvanceAuto is open every day of the month (month = 30 days) and the demand for the DEF is constant. c) If the supplier of the DEF announced that future orders must be in multiples of 100 boxes, what order quantity would you now suggest to AdvanceAuto to meet supplier's mandate while still minimizing total relevant variable annual costs
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