Using a computerized Inventory Management System, a Paint Supply Store franchise continuously monitors the inventory of all the paint located at each of their 15 stores and their distribution warehouse. The Paint Supply Store franchise sells an average of 52 gallons of Yellow Paint every week (for 52 weeks per year, Standard Deviation of the Demand =6 gallons). They purchase Yellow Paint from their supplier at a price of $3.00 per gallon. It takes 1.75 weeks to receive an order from the supplier. Administrative costs for Ordering paint have been estimated to be $25 per order. Holding Costs =30% of the purchase price per gallon per year. How much Safety Stock should the company hold to have a Service Level of 99.0% ? Reorder Point, ROP =dL+ SS d= Average Demand Rate per Time Period D= Demand Rate per Year L= Average Lead time (time periods) SS = Safety Stock =zdL dL=Ld2 (Assuming Lead Time is constant as in Periodic review) d= Standard Deviation of the demand z= Number of Standard deviations corresponding to a service level Q= Order Quantity Average inventory Level =Q/2+5S H= Holding Cost Per Year Per Unit S= Ordering/Setup Cost Per Order Total Annual Inventory Cost =(2Q)H+(QD)S+H(SS) Economic Order Quantity, EOQ =H2DS Time Between Orders =TBO=DEOQ 18 galions of paint 101 gallons of paint 726 gallons of paint 213 gatlons of paint 8 gallons of paint