Discuss the below:
Q: A local community college uses photocopying paper at a relatively constant rate of 200 packages per day. The college is open 250 days per year. The cost of a packet of paper is $25
The following information is available about the operation and purchase of the paper: Ordering cost : $60. / order Annual holding cost per unit : 20.% of cost per unit Desired cycle service level : 95% Lead time : 4 days Standard deviation of daily demand : 3 units per day Current on-hand inventory is 900 units, with no open orders or backorders.
An inventory withdrawal of 100 units was just made. - Is it time to reorder?
If the store currently uses a lot size of 1300 units, determine the annual holding cost and the annual ordering cost of this policy?
What would be the annual cost saved, if any, by shifting from the 1300-unit lot size to the EOQ?