Star enterprises is a seller of lamps. In this case consider the replenishment/stocking decision for product named Lamp A. Star purchases Lamp A from a supplier and then sells them to customers. The mean monthly demand for Lamp A is normal. It has a mean and standard deviation of 150 and 50, respectively. The lead-time for Lamp A is also normally distributed with mean of 1 month and standard deviation of 15 days (Assuming there are 30 days in a month). Star purchases Lamp A from the supplier for $30 per unit and uses an annual holding/carrying cost rate of 12%. The fixed cost associated with placing an order of Lamp A to the supplier is $80. Assume that Star estimates a $100 cost associated with each stock-out (independent of the units backordered). It targets a fill rate of 98% for Lamp A. FInd the following -
a) What is Stars’s Economic Order Quantity (EOQ), Reorder point and the associated Average monthly total cost of the operation?
b) Is this replenishment operation a Pull or a Push system?