1. Suppose that an auto part in a distributors inventory has the following characteristics:

Forecast of demand = 1,200 cases per week

Forecast error (Standard Deviation) = 450 cases per week

Lead time = 3.5 weeks

Carrying cost = 35% per year

Purchase Price, delivered = $62 per case

Replenishment order cost = $40 per order

Stock out cost = $10 per case

Probability of being in stock (desired cycle service level) during lead time = 80 %

1. Design a reorder point control system for this part, given the assigned P.
2. Design a periodic review system for this part.
3. Determine and compare the relevant costs for each approach (cycle, safety and stockout costs).
4. What service level (fill rate - percent of demand filled) do you actually achieve with both designs?