Parameter Notation Value Measurement Mean annual demand D 1418 units per year Standard deviation of annual demand sD 268 units per year Mean lead time L 0.07 years Standard deviation of lead time SL 0.03 years Inventory holding cost factor (annual) k Unit purchase cost C 0.25 per year per dollar of average inventory 57 per unit Holding cost per unit per year H per unit per year Backordering cost per unit P 12 per unit backordered Ordering cost per order S 500 per order Order quantity units Mean demand during the lead time DL units per lead time Standard deviation of demand during the lead time SDL units per lead time SDL=SQRT(L*SD^2+D^2*SL^2) Type 1 service level alpha Standard normal variate Safety stock Expected units out of stock during the lead time Type 2 service level Reorder point Annual Cycle Stock Holding Cost Annual Safety Stock Holding Cost Annual Ordering Cost Annual Backordering Cost Annual Total Relevant Logistics Cost 1 - * * - SS units nR units per cycle beta R units CSHC per year SSHC per year per year BC per year G(Q,R) per year nR=sDL*NORMDIST(2,0,1,0)-SS* (1-NORMDIST(2,0,1,1)) Questions 1. What is the optimal reorder point? 2. If the lead time uncertainty doubles as a result of supply chain breakdowns AND the supplier is able to ship no more than 300 units per order, what is the resulting Type 2 service level? Q1 Q2