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Your firm uses a continuous review (Q) system and operated 52 weeks per year. One of the items has following characteristics: Demand = 20,000 units/year Ordering cost = $40/order Holding cost = $2/unit/year Lead Time = 2 weeks Cycle Service Level = 95%
Demand is normally distributed with a standard deviation of weekly demand of 100 units. Current on-hand inventory is 1040 units with no scheduled receipts or backorders.
1. Find the Safety Stock (SS).
2. Find the annual cost of holding cycle inventory and placing orders.
3. A withdrawal of 15 units just occurred. Is it time to reorder? If so, how much should be ordered?
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