– Assume McGrainger, a supplier of MRO products, has 1600 stores distributed throughout the United States. Consider two

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– Assume McGrainger, a supplier of MRO products, has 1600 stores
distributed throughout the United States. Consider two products
that the firm supplies – large electric motors and industrial
cleaners. Large electric motors are high value items with low
demand, while the industrial cleaners are low value items with high
demand. Each motor costs $500 and each can of cleaner costs
$30. Weekly demand for motors at each store is normally distributed
with a mean of 20 and standard deviation of 40. Weekly demand for
cleaner at each store is also normally distributed with a mean of
1000 cans and a standard deviation of 100. Demand experienced by
each store is independent, and supply lead time for both products
is four weeks. The firm has an annual holding cost of 25 percent.
For each of the products, evaluate the reduction is safety
inventory that will result if it is removed from the retail stores
and carried only in a central facility. Assume a desired service
level of 0.95