Store places orders via paper that is faxed to the supplier

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Weekly demand for DVDs at a retailer is normally distributed with a mean of 1000 boxes and a standard deviation of 150. Currently, the store places orders via paper that is faxed to the supplier. Assume 50 working weeks in a year and the following data:

  • Lead time for delivery of an order is 4 weeks. 
  • Fixed cost (ordering and transportation) is $100 per order
  • Each box of DVDs costs $1
  • The retailer currently orders 20,000 DVD boxes when stock on hand reaches 4,200.
  • Cost of capital is 25%

Currently how long, on average does a DVD spend in the store? What is the annual ordering and holding cost under such a policy?

Reference no: EM132216096

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