Spring Water
The demand for coconut water at SLC WalMart is 600 gallons per week. The setup cost for placing an order to replenish inventory is $25. Orders are delivered by the supplier, who charges SLC Walmart $3/gallon for coconut water. Coconut water loses its freshness when stored, and SLC Walmart incurs an annual holding cost of $2.6/gallon. Assume that there are 52 weeks a year.
1. Determine SLC WalMart’s Economic Order Quantity in [gallons].
2. If SLC WalMart buys 750 gallons of coconut water per order, what is the order cycle of SLC WalMart (in weeks)?
3. If SLC WalMart buys 750 gallons of coconut water per order, what is the average weeks of supply of coconut water at SLC WalMart? (Hint: First find the average inventory (I). Then use Little’s Law to find the flow time (T) in weeks. Note that the flow rate (R) is 600 [gallons/week].)