What is the average amount of inventory on order

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Reference no: EM131143526

A Cold Inc. is a frozen food distributor woth 10 warehouses across the country. iven Tory, one of the warehouse managers, wants to make surenthat the inventory policies used by the warehouse are minimizing inventory while still maintaining quick delivery to A Cold's customers. Since the warehouse carries hundreds os different products, Iven decided to study one. He picked Caruso's Frozen Pizza. Demand for CFP's average 400 per day with a standard deviation of 200. Weekly demand (five days) average 2000 units with a standard deviation of 555. Since A Cold orders at least one truck from General Foods each day (General Foods own Caruso's Pizza). A Cold can essentially order any quantity of CFP it wants each day. in fact , A Cold 's computer system is designed to implement a base stock policy for each product. Iven notes that any order for CFP's arrives four days after the order. further, itncosts ACold $0.01 per day to keep a CFP in inventory, while a back order is estimated to cost ACold $0.45 . A. What base stock level should Iven choose formCFPs if his goal is to minimize holding and back-order costs? B. Suppose the base stock level 2,800 is chosen, what is the average amount of inventory on order? C. Stuppose the base stock level 2,800 is choosen. What is the annual holding cost? (Assume 260 days per year) D. What base stock level minimized inventory while maintaining a 97 percent in-stock probability?

Reference no: EM131143526

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