An allergy products superstore sells 500 of their most popular model of air filters each month. The cost of ordering and receiving shipments is $20 per order. Accounting estimates that annual inventory holding cost is $6. The store operates 240 days per year (operating days). The supplier lead time is 2 operating days. Each order is received from the supplier in a single delivery. There are no quantity discounts. a. What quantity should the store order with each order?
b. How many times per year will the store order?
c. How many operating days will elapse between two consecutive orders?
d. What is the reorder point if the company wishes to carry a safety stock of 10 filters?
e. Suppose the lead time is 3 operating days, and that the superstore wishes to maintain in- stock probability of 90%. The demand in each day is normal distributed with standard deviation 10, and the demands cross 3 days are independent. What is the re-order point? The z-score for 0.9 is 1.28.
f. What is the store's minimum total annual cost of placing orders & carrying inventory?