Question
S&T is a retailer of home goods. They receive inventory from their supplier with a 2-week lead time. Assume they order weekly, and they use
S&T is a retailer of home goods. They receive inventory from their supplier with a 2-week lead time. Assume they order weekly, and they use the order-up-to model for managing inventories. A peppermint soap sells on average one box every 5 weeks. AssumeS&T's demand is Poisson distributed.
A) How many boxes of the peppermint soap do they order on average each week?
B) Suppose S&T chooses an order-up-to level of 1 for the peppermint soap. What is their average on-hand inventory (in boxes)?
C) S&T estimates that their annual holding cost per box of peppermint soap is 20% of the price per box. The supplier charges $120 per box peppermint soap and S&T sells it for $160 per box. If S&T chooses an order-up-to level of 1 for the peppermint soap, what is their average weekly holding cost for this peppermint soap? Assume there are 48 weeks per year.
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