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Ronal sells 15,000 carvings a year. He has weekly demand of 288 carvings with a weekly standard deviation of 80. The cost for Ronal to
Ronal sells 15,000 carvings a year. He has weekly demand of 288 carvings with a weekly standard deviation of 80. The cost for Ronal to place an order to his supplier is $32.00, and the time from ordering to receipt is six weeks. The annual inventory carrying cost is $0.10 per carving.
a. What is the reorder point necessary to provide a 90 percent service level over the lead time?
b. Suppose Ronal reduces the safety stock of this item by 45 percent. What is the new service level?
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