Freshlywater serves waterbottles nationwide as well as snack foods. The manager buys a particular type...
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Freshlywater serves waterbottles nationwide as well as snack foods. The manager buys a particular type of water a company in florida that requires three weeks for delivery. The special water bottle costs $1 a bottle and may be purchased in any quantity. The fixed ordering cost is $70, and inventory holding costs are calculated using an annual inventory carrying rate of 22 percent. Based on historical data, the weekly demand for the special water bottle is normally distributed with a mean of 120 bottles and a standard deviation of 40 bottles. The Freshlywater manager currently has a policy to place a replenishment order when there is 4-weeks supply left. Each order consists of 6-weeks of supply. For the purposes of your calculations, you may assume that there are 48 weeks in a year and that all excess demand is fully backlogged.
a. [6 points] What are the reorder level and order quantity currently used at Freshlywater for the special water bottle ?
b. [12 points] What is the proportion of demand that cannot be satisfied immediately from stock under the current policy?
c. [12 points] What reorder level and order quantity should the manager use if she wishes to ensure that the probability of not stocking out during the lead time is 95 percent?
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