ComfyShoes is an online retailer which carries various shoe lines. For simplicity, we are only interested in the number of pairs of shoes (the unit is a pair of shoes), not in differences amongst lines and sizes. The company uses a fixed-quantity inventory system (FQS) to manage their stock. Following is key information either current or averaged over years of operations:
Average demand 1140 pairs per week
Lead time 3 weeks
Order cost $270 per order
Unit cost $14 for a pair of shoes
Annual inventory holding cost 18% for the whole year
Standard deviation of daily demand 11 pairs per day
Desired service level with safety stock 90%
Current on-hand inventory 3524 pairs of shoes
Current scheduled receipts 0 pairs of shoes
Current backorders 49 pairs of shoes
Weeks of operation 51 weeks
Days of operation 7 days in a week
Required:
a. Find the Economic Order Quantity (EOQ). (Rounded up to a whole number)
b. Find the total annual ordering and inventory-holding cost (TAC) for the EOQ.
c. Find the current inventory position (IP).
d. Find the reorder point without safety stock R(AD). State the ordering rule. Based on the current IP, determine if the company would make an order and state the order quantity. Sketch the normal demand distribution in the lead time to illustrate the service level.
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