Input Data
Mean daily demand, D = 5000
Standard deviation of daily demand, sD = 4000
Desired cycle service level, CSL = 0.99
Cost per phone, C = 100$
Holding cost, h = 20%
Outputs for Continuous Review Policy
Sea Transport Air Transport
Transport cost per unit = 0.50$ Transport cost per unit = 1.50$
Lead time, L = 36 Lead time, L = 4
Average batch size = 100,000 Average batch size = 5,000
Standard deviation of demand during L = 24,000 Standard deviation of demand during L = 8,000
Required safety inventory = 55,832 Required safety inventory = 18,611
Days of safety inventory = 11.17 Days of safety inventory = 3.72
Average cycle inventory = 50,000 Average cycle inventory = 2,500
Days of cycle inventory = 10 Days of cycle inventory = 0.50
Cost of safety+cycle inventory per year = 2,116,647$ Cost of safety+cycle inventory per year = 422,216$
Transportation cost per year = 912,500$ Transportation cost per year = 2,737,500$
Annual holding + Transport cost = 3,029,147$ Annual holding + Transport cost = 3,159,716$
In transit inventory = 180,000 In transit inventory = 20,000
Cost of holding in transit inventory = 3,600,000$ Costof holding in transit inventory = 400,000$
Total cost including in transit inventory = 6,629,147$ Total cost including in transit inventory = 3,559,716$