Suppose that Shoe-n-co follows a periodic review policy with a review period of 2 weeks. Recall that the firm has four regional warehouses with demand at each warehouse that is normally distributed with a mean of 10,000 per week and a standard deviation of 2,000. Annual holding cost is 25%, and each unit of Prancs rubber shoes costs the company $10. Each order incurs an ordering cost of $1,000 (primarily from fixed transportation cost), and lead time is 1 week. Further, annual holding cost is 25%, and each unit of Prancs rubber shoes costs the company $10. Replenishment lead time is 1 week. The company wants a service level of 95%. Assume 50 working weeks per year.
a) Assuming that each warehouse operates independently, what should be the Target Inventory Position of the optimal ordering policy?
b) How much safety stock does each warehouse have?
c) How much average inventory is held at each warehouse?
d) What is the annual inventory cost (holding + ordering) for Shoe-n-co?
e) On average, how long does a unit of product spend in the warehouse before being sold?