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Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has
Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has a demand of 6,000 units per year. The cost of each unit is $100, and the inventory carrying cost is $10 per unit per year. The average ordering cost is $30 per order. It takes about 5 days for an order to arrive, and the demand for 1 week is 120 units. (This is a corporate operation, and there are 250 working days per year.) e) What is the safety stock needed to attain a 1% risk of stockout during lead time? f) What is the annual holding cost of maintaining the level of safety stock needed to support a 1% risk? 8) If management specified that a 2% risk of stockout during lead time is acceptable, would the safety stock holding costs decrease or increase
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