Chicago’s Treadway Tires Dealer must order tires fromits national warehouse. It costs $10,000 to place an orderand $400 to review the inventory level. Annual tire sales are N(20,000, 4,000,000). It costs $10 per year to hold a tire ininventory, and each order arrives two weeks after beingplaced (52 weeks 1 year). Assume that all shortages arebacklogged.a Estimate R and the number of orders per year thatshould be placed.b Using the answer in part (a), determine the optimal(R, S) inventory policy. Assume that the shortage cost is$100 per tire.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
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Chicago’s Treadway Tires Dealer must order tires from
its national warehouse. It costs $10,000 to place an order
and $400 to review the inventory level. Annual tire sales are

N(20,000, 4,000,000). It costs $10 per year to hold a tire in
inventory, and each order arrives two weeks after being
placed (52 weeks 1 year). Assume that all shortages are
backlogged.
a Estimate R and the number of orders per year that
should be placed.
b Using the answer in part (a), determine the optimal
(R, S) inventory policy. Assume that the shortage cost is
$100 per tire.

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