Determine the optimal service level

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Reference no: EM131016114

Given the following data for a particular product calculate the optimal service level. Sales response rate is 0.15% change in revenue for a 1% change in the service level (fill rate). Trading margin is $14 per item; inventory-carrying cost is 30% per year, annual sales through the warehouse is 90,000 items. Cost of each item is $50, demand standard deviation is 450 items for a week, and the lead-time is 5 weeks.

a. Calculate Delta_P

b. Calculate Delta_C

c. Calculate Delta_Z

d. Determine the optimal service level

Reference no: EM131016114

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