XYZ company is determining the inventory policy for product A which has annual demand distributed as Normal (500, 120). The value of each item is $25. The fixed ordering cost per order is $200. The lead time from supplier of an order is stochastic with mean 4 weeks and standard deviation 2 weeks. The company calculates the holding cost by using an interest rate of 25%. a) Determine the (Q, R) values if the company desires to use a Type 1 service level of 98%. b) Determine the (Q, R) values if the company desires to use a Type 2 service level of 95%. c) Determine the (Q, R) values if the company desires to use a shortage cost of $6.74 per unit of unsatisfied demand.

XYZ company is determining the inventory policy for product A which has annual demand distributed as Normal (500, 120). The value of each item is $25. The fixed ordering cost per order is $200. The lead time from supplier of an order is stochastic with mean 4 weeks and standard deviation 2 weeks. The company calculates the holding cost by using an interest rate of 25%. a) Determine the (Q, R) values if the company desires to use a Type 1 service level of 98%. b) Determine the (Q, R) values if the company desires to use a Type 2 service level of 95%. c) Determine the (Q, R) values if the company desires to use a shortage cost of $6.74 per unit of unsatisfied demand.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter10: Introduction To Simulation Modeling

Section10.4: Simulation With Built-in Excel Tools

Problem 14P

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