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The SCO Company sells desks that have a demand of 4 units per month and cost...

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General Management

The SCO Company sells desks that have a demand of 4 units permonth and cost $25 each, the annual carrying charge is 30 percentof the product value, and it costs $15 to place an order. Thecompany is considering installing either a Q or a P system forinventory management. The standard deviation of demand has been 4units per month, and the replenishment lead time is two months, a90 percent service level is desired. For Parts a and b below,specify the two key decisions under each inventory managementsystem, and describe the implementation of the respective system(e.g., the description of a EOQ system with reorder point R andorder quantity Q will be: When the inventory level drops to thereorder point level R, then a new order of size Q will be placed).You can round your calculations to 3 decimal places.

a) How would you design a continuous review system?

b) How would you design a periodic review system?

c) What are the pros and cons of using the periodic systemcompared with using the continuous review system for thisproduct?

Answer & Explanation Solved by verified expert
4.0 Ratings (809 Votes)
Demand 4x12 48 per year EOQ 2 x 48 x 15 03 x 2512 1385 14 Number of orders per year 4814 34 4 Continuous review system Reorder point avg demand x lead time safety stock safety stock z x standard    See Answer
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