Modern Furniture Stores sells modern coffee tables. The expected demand for next 12 months is 500 coffee tables. Tables are handmade in Seattle. The cost of ordering a set of tables is $500. In addition the average cost of storing a coffee table is $150. The time between placing an order and receiving it at the store is 5 days. Finally the daily standard deviation for the demand is estimated as 0.5 tables per day.
a. Find the reordering point.
b. What would be the safety stock required for a 95% customer service level?
c. What would be the yearly cost of carrying the safety stock during the year?
d. What would be the new reorder point?
The manufacturer offers the following purchasing options:
Units Price
0 - 99 1,000
100 - 299 950
300 - 499 900
500 -999 850
1,000+ 800
a. Find the order quantity that minimizes total cost.
b. Find the new total inventory cost (include safety stock).
c. Find the new inventory turnover.
d. Find the new inventory cycle.