Calculate reorder point and achieved cycle service level

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Reference no: EM133828918

Question

Disk Drives Limited (DDL) produces a line of internal Winchester disks for PCs. The drives use a 3.5 inch platter from an outside supplier. Demand data and sales forecasts indicate that the weekly demand for the platters seems to be closely approximated by a normal distribution with mean 19 and standard deviation of 10. The platters require a three-week lead time for receipt. DDL has been using a 40 percent annual interest charge to compute the holding costs. The platters cost $50 each; order cost is $75 per order. The cycle stock is identified using EOQ policy. Assume 1 year is 52 weeks.

Purchasing manager is following a continuous review policy and currently reordering whenever the inventory on hand is equal to twice as much as the safety stock level. Calculate the reorder point and achieved cycle service level in this policy.

Reference no: EM133828918

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