A company ‘HowMany’ opens a new store in SE Minnesota. To operate this store with minimum cost, Pete needs to decide the order quantity by EOQ and reorder point, since the company uses (Q,R) policy for inventory management and maintain its service level at least 97%.
Lead time : 10 days
Mean demand per day : 5
Standard Deviation per day : 3
Ordering cost : $ 100
Annual Inventory holding cost per unit : $2
Number of days in a year : 365
The payment for products is paid on delivery. Therefore, inventory holding cost is only for the inventory on hand.
You may need the standard Normal z table.
What would be the average inventory level under reorder point or (Q,R) policy?