What are the expected costs per week

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Reference no: EM132185872

Suppose we operate a retail store that sells paper towels, with a sales unit of a package. Demand for paper towels is normally distributed with average demand of 120 packages per week with a standard deviation of 20 packages per week.

Suppose the store uses a continuous review inventory policy with a Q, R policy. The holding cost is $0.10 per package per week, and the fixed ordering cost is $100. Suppose that the delivery lead time is 1 week but it is uncertain and has a standard deviation of 0.2 weeks. The service measure is the cycle service level (CSL) and the target is 0.98 (or 98%).

- Determine the integer values of Q, R that minimize the expected costs subject to satisfying the service target.

- What is the average inventory level, if we follow the (Q,R) policy?

-What are the expected costs (holding costs plus fixed order costs) per week?

Reference no: EM132185872

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