You are a distributor of steel cables that are used in many different kinds of construction applications. You stock this product in reels of either 2,000 feet or 5,000 feet. 1. Your demand for the 5,000-foot reels is 1,000 reels per month. The standard deviation of demand is 200 reels per month. Reorder lead-time is 6 weeks. a. How much safety stock do you need to achieve a service level of 90%?
b. What is the reorder point for this level of service? 3. You are able to locate a new supplier who can deliver in 3 weeks.
c. What would your reorder point be with a 3-week lead-time for a 90% service level?

Suppose that a major city’s main thoroughfare, which is also an interstate highway, will be completely closed to traffic for two years, from january 2014 to december 2015, for reconstruction at a cost of $535 million. if the construction company were to keep the highway open for traffic during construction, the highway reconstruction project would take much longer and be more expensive. suppose that construction would take four years if the highway were kept open, at a total cost of $800 million. the state department of transportation had to make its decision in 2014, one year before the start of construction (so that the first payment was one year away). so the department of transportation had the following choices: (i) close the highway during construction, at an annual cost of $267.5 million per year for two years. (ii) keep the highway open during construction, at an annual cost of $200 million per year for four years. now suppose the interest rate is 80%. calculate the present value of the costs incurred under each plan.