Mozer’s Garden Solutions has a chain of retail stores in the mid-west. Mozer’s orders hedge trimmers from a wholesaler. Every year Mozer’s requires 9,000 hedge trimmers. The trimmers cost $250 per trimmer from their wholesaler.
The estimated cost of ordering at the wholesaler and paying shipping fees is $200 per order: K = $200
The holding cost per hedge trimmer is estimated to be 10% of the cost of the trimmer h = 0.1 × $250 = $25
The EOQ for the hedge trimmers is 379 trimmers.
1. Describe an appropriate ordering policy if the lead time (LT) for the hedge trimmers is constant at 3 months. Specify the amount that should be ordered at the ROL.
2. If Mozer's guarantees a 95% in-stock rate, what should their Safety Stock of hedge trimmers be?
What is the total ROL = demand during lead time + Safety Stock?
The standard deviation of the monthly demand is 300.
For a 95% in-stock rate, the z value is 1.96.