# A mail-order firm has 4 regional warehouses. Demand for PopularWidget is similar in all 4

Question: A mail-order firm has 4 regional warehouses. Demand for PopularWidget is similar in all 4 warehouses, normally distributed with a mean of 7,500 units per month and standard deviation of 800. Inventory holding cost is \$25 for each item in inventory at the end of the week. By purchasing PopularWidget from the manufacturer, the firm incurs ordering cost ofSee the answerSee the answerSee the answer done loadingA mail-order firm has 4 regional warehouses. Demand for PopularWidget is similar in all 4 warehouses, normally distributed with a mean of 7,500 units per month and standard deviation of 800. Inventory holding cost is \$25 for each item in inventory at the end of the week.
By purchasing PopularWidget from the manufacturer, the firm incurs ordering cost of \$2,240 (primarily fixed transportation costs), and the leadtime is 1 day. The firm uses the continuous review inventory management system. The manager wants the probability of stocking out to be no more than 5% in each ordering cycle (z = 1.65).
Questions:
a) What lot size Q should the company adopt in each independent warehouse?
Qeach = Blank 1. Fill in the blank, read surrounding text. b) What reorder point ROP should the company adopt?
ROP = Blank 2. Fill in the blank, read surrounding text. c) Management wants to shut down all warehouses but one, the most centrally located in the region. What should be the safety stock SS for the pooled inventory
SS = Blank 3. Fill in the blank, read surrounding text.

Mean demand, d = 7500 units/month Std dev, s = 800 Holding cost, H = \$ 25 per unit per week =…View the full answer