Suppose that an auto part in a manufacturer's inventory has the following characteristics
Forecast Demand= 1250 cases per week
Forecast error, std.dev.= 475 cases per week
Lead Time= 2.5 weeks
Carrrying costs= 30% per year
Purchase prics, delivered =$56 per case
Stockout cost= $10 per case
Probability of being in stock during the Lead time, P = 80%
a. Design a reorder point control system for this part, given the assigned P. How would you state the inventory control policy f the ROP>Q*?
b. Design a periodic review system for this part. Now assume that the probability of being in stock extends to the order interval plus lead time.
c. Determine and compare the relevant cost odf each approach
d. What service level (Fill rate) do you achieve with both designs?