An online clothing retailer purchases a clothing machine called CLOTHing from the manufacturer at $ 40 / unit. The weekly demand for CLOTHing is 60 units. The fixed ordering cost for CLOTHing is $100 per order and the annual holding cost rate is 25 % of the unit purchasing cost. Assume 52 weeks in year.

A.) Currently the company is implementing an EOQ policy for CLOTHing. Determine the order quantity and the total annual inventory-related cost (TC).

Order quantity:

TC:

B.) The company has developed an IT system, which simplified its order fulfillment process and lowered its fixed ordering cost by 50%. Select the impact of this change on the following measures for CLOTHing. Assume other parameters remain the same.

EOQ: increase decrease no changes

Number of orders/year: increase decrease no changes

Total inventory-related cost: increase decrease no changes

Use the following information for C-E:

Due to frequent technological developments in the industry, the demand for CLOTHing is no longer deemed steady. Weekly demand for CLOTHing exhibits variability with an average demand of 60 units/week and a standard deviation of 12 units/week. The company wants to target a 94% service level for CLOTHing. The shipment from the manufacturer arrives exactly one week after the order placement.

C.) How much safety stock of CLOTHing should be held at the central depot?

Safety stock:

D.) When should the company place an order for CLOTHing? (i.e., what is the reorder point?)

ROP:

E.) If the ordering system is set up in such a way that an order is placed for CLOTHing whenever the inventory level reaches 70 units, what would be the implied service level for CLOTHing?

Implied service level: