Crew Soccer Shoes Company is considering a change of their current inventory control system for soccer shoes. The information regarding theshoes is given below.
Average demand = 200 pairs/week
Lead time = 3 weeks
Order cost = $65/order
Holding cost = $4.00/pair/yr
Desired service level = 95 percent
Standard deviation of weekly demand = 50
Number of weeks per year = 52
The company decides to use a fixed order quantity system.
1.What is the economic order quantity?
2.What should be the reorder point to have a 95 percent service level? Explain how the system will operate.