The monthly demand of a new motorcycle is 200 units. The manufacturer wants to design an inventory policy for tires. Tires are ordered from a Korean supplier at a cost of $70 and each order takes 3 weeks to arrive to the facility. The cost of placing an order is $500. Also history indicates that the average storage cost is $5 per month.
a. What is the optimal order quantity?
b. What would be the minimum inventory cost?
c. The supplier is offering a discount price of $0.50 per tire if the company orders 1000 or more tires. Does it worth to take the discount? Justify.
d. The company wants to ensure a 95% service level (z=1.645). What would be the annual inventory cost of the safety stock and the reodering point? (Assume a daily standard deviation demand of 5 vehicles)