Problem:
Yearly demand of high performance tires at a retail store is 10,000 per year. The ordering cost is $400, the carrying cost is $100, and the lead time is 9 days. The retail store only closes 5 days in the year.
Required:
Question 1) Find the optimal order size
Question 2) Find the total annually inventory cost.
Question 3) What is the reorder point?
The current price of each tire is $150. The supplier offered a discount of $10 per tire if the retailstore orders more than 300.
Question 4) What is the right decision? (justify your answer)
The company wants to ensure a 95% (z=1.645) service level.
Question 5) What would be the cost of the safety inventory? Solve the given numerical problem and illustrate step by step calculation.