United Airlines has an agreement to buy jet fuel from Exxon. The goal is to minimize total cost (i.e., ordering cost + holding cost). The annual demand for fuel is 42,000 barrels. Exxon charges United $3500 to process each order. United incurs a holding cost of $23 per barrel.
The standard deviation of daily demand is 14 barrels per day. What is the inventory level (re-order point) at which United needs to place an order if the lead time for orders is 13 days and the desired service level is 95% (hint: there is a z-table calculator in Moodle)?