What is the reorder point

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Reference no: EM134036091

Assignment:

(EOQ & Safety Stock Model) Irvine Regional Hospital (IRH) consumes 500 boxes of bandages per week at a constant rate. The price of bandages is $70 per box. The cost of processing an order is $60, and the cost of holding one box for a year is $10.5. The lead-time is 3 days.

(a) What is the reorder point (ROP)? How many boxes of bandages should IRH order every time (i.e., EOQ)?

(b) Currently, IRH orders 900 boxes of bandages every time. If they order based on the results calculated in (a) above, how much could IRH save in the total annual cost?

(c) Suppose that the demand on bandages becomes uncertain which is normally distributed with mean 500 boxes of bandages per week and a standard deviation of 100 boxes per week. The purchasing department uses a re-order point system to manage its inventory of bandages and maintains a service level of 95%. What is the reorder point for the bandages?

Reference no: EM134036091

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