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Ryan's Liquor Shoppe orders Scotch whiskey four times a year. The lead time for reordering is estimated to be 25 days. Average demand for Scotch whiskey is 2 cases per day (320 business days per year). Ryan's has estimated the stock-out cost to be $50 per case and the inventory holding cost to be approximately $30 per case per year. Based on past reorder periods, actual demand distribution is: Demand during Lead Time (DDLT) Frequency 40 cases 32 times 45 64 50 128 55 64 60 32 Ryan's is considering carrying 0, 5, or 10 boxes of safety stock. a. Determine the annual shortage cost (TSC) and safety stock holding cost (SHC). b. Determine the optimal level of safety stock.
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