A service station uses 2500 oil filters during the course of a year, and this usage is constant throughout the year. These oil filters are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost per oil filter per year is $1.50 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year. A) the service manager recognizes that although he knows the lead time is 2 days, the average daily demand usually varies. He kept records and has determined that the average daily demand is normally distributed with a standard deviation of 2.5 units. If he would like to maintain a service level of 90%, what should his re-order point be?
1. A service station uses 2500 oil filters during the course of a year, and this usage is constant throughout the year. These oil filters are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost per oil filter per year is $1.50 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year.
A) the
daily demand usually varies. He kept records and has determined that the average daily demand is
of 2.5 units. If he would like to maintain a service level of 90%, what should his
re-order point be?
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