Suppose that No Tell Motel in Problem 5 uses a P system instead of a Q system. The average daily demand is 15 boxes (90/6), and the standard deviation of daily demand is 6.124 boxes.
Thus,
• Order cost =$74/order
• Annual holding cost = 24 percent of cost
• Desired cycle-service level = 95 percent
• Lead time = 3 weeks
• Standard deviation of weekly demand = 25 boxes
• Current on-hand inventory is 159 boxes, with no open orders or backorders.
• No Tell Motel operates 52 weeks per year, 6 days per week. It purchases bath soap for $5.65 per box.
a. What P (in working days) and T should be used to approximate the cost tradeoffs of the EOQ?
b. How much more safety stock is needed than with a Q system?
c. It is time for the periodic review. How many boxes should be ordered?