An office building that operates 365 days per year maintains inventories of office supplies, including a specialized paper. Currently, this paper is ordered once every two weeks. Over the course of a year, its average rate of usage is 75 reams per week (with a forecast CV is 20%). The paper costs $20 per ream, and the holding rate is 15% annually. The fixed ordering cost is $35 and the lead time for receiving an order is 4 weeks. Target cycle service level is 93%.
a. Calculate the preferred order up to level (OUL).
b. If the manager switched to a fixed order quantity system with an optimal EOQ, how frequently would orders be placed?
c. Do the results imply that daily ordering is too frequent?