Demand for widgets is 52,000 widgets/year.
Ordering cost is $50.00 per order. Unit cost is $5.00. The carrying Charge is 20%/year. Demand is 1,000 per week. Lead time is 2 weeks. Standard deviation of demand is 300/week.
1. Calculate a fixed quantity reorder point system with a 95% service cycle level. Explain how it works.
2. Current order quantity is 3,000 units. How much would you save versus old way?
3. Using the same data, calculate a fixed period system with a 90% service cycle level, explain how it works.