Carol Philips is in charge of pharmaceutical suppliers at City General Hospital (CGH). During the past year, average forecasted daily demand for JY-25 bandages has been 20 cases. The forecast error standard deviation is 7.4 cases per day. The average lead time for this item is 10 days with a standard deviation of lead time of 1.8 days. The item cost is $140 per case, associated annual inventory carrying cost is 27% of the item cost, and ordering cost is $20. The Hospital has a targeted service level of 90% for these bandages. CGH is open 365 days per year.
1. What is the reorder point for the JY-25 bandages?
2. What is the total annual cost associated with Ms. Philip’s current policy of ordering 200 cases?
3. How much could be saved by ordering the EOQ amount?
4. Demand during a product’s lead time is 218 units with a standard deviation of 40 units. If the reorder point is 300 units, what is the service level?
5.With a reorder point is 80 units, an average demand during lead time is 70 units, and a standard deviation of the forecast error during lead time is 8 boxes per day: What is the customer service level?