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Demand for a popular hospital bed from a Hill-Rom warehouse in the US is normally distributed with a mean of 374 units/week and standard deviation
Demand for a popular hospital bed from a Hill-Rom warehouse in the US is normally distributed with a mean of 374 units/week and standard deviation of 65 units/week. Lately, Hill-Rom's contract manufacturer has been unreliable with its deliveries. Hill-Rom estimates the lead time is normally distributed with a mean of 3 weeks and standard deviation 3 weeks. Hill-Rom orders the beds at a unit cost of $2,597. The annual cost of carrying inventory at the warehouseis 26% of the purchase cost per unit per year. Hill-Rom reviews its inventory continuously. Assume the warehouse operates 52 weeks/year, 7 days/week, and 364 days/year. Suppose that Hill-Rom works with its contract manufacturer to improve reliability in the supply chain such that lead times are guaranteed at 3 weeks. Compute the savings in annual holding cost of the safety stock (in \$) needed to maintain a service level of 92%. - Carry calculations to at least 3 decimal places. - Round your answer to the nearest tenth of a dollar (one decimal place)
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