Question
ICON Candies is a three store retailer of freshly boxed chocolate candies serving the greater NYC metropolitan area. ICON orders it chocolate candies directly from
ICON Candies is a three store retailer of freshly boxed chocolate candies serving the greater NYC metropolitan area. ICON orders it chocolate candies directly from a candy maker in Belgium and has a central refrigerated warehouse where the firm stores individual candies shipped directly to Newark (by air) from the supplier. The lead-time from order to receipt is 4 weeks. ICON's order costs are $300 per order and the holding cost are 20% of the cost of an individual candy. Candies are ordered as individual units (pieces), but the order quantity needs to be a multiple of 12 (each box of candy created by ICON has 12 pieces of candy) and the average cost per candy is $.85. A feature of an ICON box of candy is that you never know exactly what's in it. Each box is assembled by randomly selecting 12 candies from a possible assortment of 20 different types of cream-filled chocolate. The grouping only occurs when the boxes are created and "no two boxes are exactly alike" is the product's tagline. Each box of candy is sold for $24.99 and annual demand follows a normal distribution with a mean of 6000 boxes and a standard deviation of 320.
To maintain customer goodwill, ICON has set a high service level objective of 95% in stock. Consider a year to have 52 weeks or 365 days.
What should be ICON Candy's ROP (Reorder Point). Round up the ROP to the nearest multiple of 12. Note your answer may differ slightly depending upon rounding. Pick the answer closest to your answer.