Weekly demand for quilts at Macy's is normally distributed with a mean of 308 units/week and standard deviation of 78 units/week. The lead time is also normally distributed with mean 4 weeks and standard deviation 4 weeks. Macy's orders quilts at a unit cost of $225. The annual cost of carrying inventory at the store is 21% of the purchase cost per unit per year. The store reviews its inventory continuously. Compute the reorder point needed to maintain a service level of 95%. Round your answer to the nearest tenth of a unit. A table of z-values is provided for your reference.
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We need to find the z-value corresponding to a 95% service level. From the z-table, we find that the z-value is 1.645. Show more…
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The annual demand for a product is 16,400 units. The weekly demand is 315 units with a standard deviation of 90 units. The cost to place an order is $31.00, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is $0.20 per unit. a. Find the reorder point necessary to provide a 95 percent service probability. (Use Excel's NORM.S.INV() function to find the z value. Round the z value to 2 decimal places.) b. Suppose the production manager is asked to reduce the safety stock of this item by 55 percent. If she does so, what will the new service probability be? (Use Excel's NORM.S.DIST() function to find the correct probability for your computed z value. Round the "z" value to 2 decimal places and the final answer to 1 decimal place.)
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