Weekly demand for jeans at a department store is normally distributed, with a mean of 125 and a standard deviation of 50. The supply plant takes four weeks on average with a standard deviation of two weeks to supply the department store order. The store manager monitors its inventory continuously and reorders jeans when the available inventory drops below 600.

How much safety stock does the store carry?

If the store manager wants to target a CSL of 95 percent (z=1.65), how much safety inventory of jeans should the store carry?

What should its ROP be?

2. Weekly demand for electric motors at a Japanese motor manufacturer is normally distributed, with a mean of 1,200 and at standard deviation of 1,200. Motors are currently assembled in China and delivered at a cost of 18,000 yen/motor. The supplier takes eight weeks to supply an order. A local Japanese manufacturer has offered to deliver motors with a lead time of one week at a cost of 18,300 yen per motor. The motor manufacturer is targeting a CSL of 98% (z=2.05) and monitors its inventory continuously. The manufacturer incurs an annual holding cost of 30 percent.

What is the total annual cost of the Chinese supplier (safety stock holding and product costs)?

What is the total annual cost of the Japanese supplier (safety stock holding and product costs)?

What would be the total annual costs of the Chinese supplier and the Japanese supplier if the motor manufacturer increases the CSL target to 99% (z=2.33) and the Chinese supplier will commit to a four week lead time?