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A firm that makes assembles electronic circuits has an average demand of 100,000 units per year with a standard deviation of 2,000 units. (The demand is stochastic). Each time an order is placed, a setup cost of $100 is incurred. Holding cost per item is $2 per unit per year. The lead time for the electronic circuits is 5 days. (Assume that the firm works for 250 days per year). The demand for the product is assumed to be normal and the firm wants to reach the 99.5% service level by keeping enough safety inventory. (To get 99.5% service level, Z? should be 2.576). a) What is the economic order quantity? b) What is the required safety stock? c) What is the reorder point?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M93115560

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