The annual demand for a product is 180,000 units with a daily standard deviation of demand of 90. The cost to place an order is $750 and holding one unit in inventory costs $15 a year. Lead time is 4 days. A 90% cycle service level is being used. The company operates 360 days a year. On-hand inventory is currently 2800 units. The company is responsible for the cost of pipeline inventory.
Develop continuous and periodic policies for this product. Determine the amount of the various inventory types (cycle, safety, pipeline) in the system as well as the total inventory related costs for each policy.
For the periodic system, you can select any order interval you wish, but include a justification as to why you believe it is a reasonable interval. For the interval you select, specify both the quantity which should be ordered now and the average size order quantity.