Crew Soccer Shoes Company is considering a change of their current inventory con

Question

Crew Soccer Shoes Company is considering a change of their current inventory control system for soccer shoes. The information regarding the shoes is:

Average demand-200 pairs per week

Lead time- 3 weeks

Order cost- $65 per order

Holding cost- $4 per pair per year

Desired service level- 95%

Standard deviation of weekly demand- 50

number of weeks per year- 52

The company decides to use a fixed order quantity system. What is the economic order quantity? What should be the reorder point to have a 95% service level? Explain how the system will operate.

Explanation / Answer

a)
UsingExcel functions: Z=NORMSINV(0.95) ? 1.64485
ROP ? 3

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