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Daily demand of car batteries in Best Auto Mart (BAM) is normally distributed with a mean of 15 and a standard deviation of 10. BAM opens 365 days a year. Its replenishment lead time follows a normal distribution with a mean of 5 days and a standard deviation of 2 days. The inventory holding cost at BAM is $17 per battery per year. The fixed ordering cost is $315 per order. BAM targets a cycle service level of 97.75% [F-1 (0.9775,0,1)=2]. It uses a periodic review policy.

(a) How often should BAM review its inventory?

(b) On average, what is the yearly inventory holding cost incurred by BAM.?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92278362

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