Peter Sagan is in charge of maintaining hospital supplies at Champs Hospital. During the past year...

Peter Sagan is in charge of maintaining hospital supplies at Champs Hospital. During the past year the mean weekly demand for a special type of tubing was 186 packages of this tubing with a standard deviation of 13 packages of tubing. The lead time for receiving this tubing from the supplier is 1.5 weeks. Peter would like to maintain a 95% service level and places an order for 750 packages every time an order is placed.

a) How much safety stock should be used for a 95% service level?

b) If the weekly demand is 186 and there is a 1.5 week lead time - what is the reorder point (95% service level)?

c) How much safety stock should be used for a 99% service level?

d) If the weekly demand is 186 and there is a 1.5 week lead time - what is the reorder point (99% service level)?

e) If the carrying cost per year is $0.50/unit/year - what is the additional cost associate with the 99% service level compared to 95% service level (i.e. cost of safety stock at 99% level - cost of safety stock at 95% service level)?

Expert Solution

orchestra answered 2 years ago

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