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The manager at SaskTires, a distributor of tires in Saskatchewan, uses a continuous review policy to manage inventory. The manager currently orders 10,000 tires when
The manager at SaskTires, a distributor of tires in Saskatchewan, uses a continuous review policy to manage inventory. The manager currently orders 10,000 tires when the inventory of tires drops to 6,000. Weekly demand for tires is normally distributed, with a mean of 2,000 and a standard deviation of 500. The replenishment lead time for tires is two weeks. Each tire costs SaskTires $40, and the company sells each tire for $80. SaskTires incurs an annual holding cost of 25 percent.
- How much safety inventory does SaskTires currently carry?
- What is the cycle service level under the manager's current inventory policy?
- What is the expected understock under the manager's current inventory policy?
- What is the expected overstock under the manager's current inventory policy?
- What is the optimal cycle service level based on the given information?
- What is the optimal safety inventory level based on the given information?
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