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Smylie & Son uses a fixed-period system to manage its inventory of hand-rolled cigars. One model, the el diablo, enjoys robust demand at 480 boxes
Smylie & Son uses a fixed-period system to manage its inventory of hand-rolled cigars. One model, the "el diablo," enjoys robust demand at 480 boxes per week (20 cigars per box) with a standard deviation of 120. Cigars must be stored in a carefully controlled climate, so storage costs are $5/cigar per year. Smylie and Son's supplier is located on an island south of Miami, Florida, and ordering is complicated and thus expensive, at $1,500 an order. Even at that price, it takes an average of six weeks to receive a shipment. El diablo is popular even at the exorbitant price Smylie & Son charges, so the company sets the replenishment level at an even 7,000. What is the service level it is using? a. 73% b. 89% c. 65% d. 81%
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To determine the service level that Smylie Son is using we first need to understand the relationship between the order quantity the demand during the lead time and the safety stock The service level c...Get Instant Access to Expert-Tailored Solutions
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