sells wireless routers that are very popular in the market with a weekly demand
that is normally distributed with a mean of 20,000 and a standard deviation of
6,000. WiFi outsources manufacturing of these routers to a local contract
manufacturer who charges $50 per router. Each time WiFi places an order they
incur an order cost of $2,000. WiFi has an annual holding cost of H=$10 per unit
per year. The lead time for replenishment is one week. Assume 50 weeks
in a year. Show all your work in the space provided.
the optimal order size (EOQ) that WiFi should order from its manufacturer? Also
compute the total inventory (holding + ordering) costs of the EOQ policy.
should the reorder point be if WiFi provides a service level of 95%? (Assume
Z(0.95) = 1.65)
overseas supplier has been identified who can supply routers for $49.50 each
rather than $50. The overseas shipping will raise the unit order cost to
$50,000 and the lead time to 4 weeks. Should WiFi use the overseas supplier?
your work in the box below.
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