Q3. The manager at Goodstone Tires, a distributor of tires in Illinois, uses a continuous review policy to manage invent
Posted: Mon May 30, 2022 8:58 am
Q3. The manager at Goodstone Tires, a distributor of tires in
Illinois, uses a continuous review policy to manage inventory. The
manager currently orders 10,000 tires when the inventory of tires
drops to 6,000. Weekly demand for tires is normally distributed,
with a mean of 2,000 and a standard deviation of 500. The
replenishment lead time for tires is two weeks. Each tire costs
Goodstone $40, and the company sells each tire for $80. Goodstone
incurs a holding cost of 25 percent. How much safety inventory does
Goodstone currently carry? At what cost of understocking is the
manager’s current inventory policy justified? How much safety
inventory should Goodstone carry if the cost of understocking is
$80 per tire in lost current and future margin?
Illinois, uses a continuous review policy to manage inventory. The
manager currently orders 10,000 tires when the inventory of tires
drops to 6,000. Weekly demand for tires is normally distributed,
with a mean of 2,000 and a standard deviation of 500. The
replenishment lead time for tires is two weeks. Each tire costs
Goodstone $40, and the company sells each tire for $80. Goodstone
incurs a holding cost of 25 percent. How much safety inventory does
Goodstone currently carry? At what cost of understocking is the
manager’s current inventory policy justified? How much safety
inventory should Goodstone carry if the cost of understocking is
$80 per tire in lost current and future margin?