This document presents an optimal inventory policy for an item with probabilistic demand, including an economic order quantity of 400.20 units, a reorder point of 195.12 units, and a safety stock of 41.12 units. The policy aims for an expected 1 stockout per year while minimizing total annual costs of $529.59, which includes $289.47 in annual inventory holding costs and $240.12 in annual ordering costs.
This document presents an optimal inventory policy for an item with probabilistic demand, including an economic order quantity of 400.20 units, a reorder point of 195.12 units, and a safety stock of 41.12 units. The policy aims for an expected 1 stockout per year while minimizing total annual costs of $529.59, which includes $289.47 in annual inventory holding costs and $240.12 in annual ordering costs.
This document presents an optimal inventory policy for an item with probabilistic demand, including an economic order quantity of 400.20 units, a reorder point of 195.12 units, and a safety stock of 41.12 units. The policy aims for an expected 1 stockout per year while minimizing total annual costs of $529.59, which includes $289.47 in annual inventory holding costs and $240.12 in annual ordering costs.
Order-Quantity Reorder-Point with Probabilistic Demand
Annual Demand 8,008
Ordering Cost $12.00 Annual Inventory Holding Rate % 20 Cost per Unit $6.00 Working Days per Year 250 Normal Distribution for Lead Time Demand Mean 154 Standard Deviation 25 Probability of a Stockout 0.05
Optimal Inventory Policy
Economic Order Quanity 400.20
Reorder Point 195.12 Safety Stock 41.12 Annual Inventory Holding Cost $289.47 Annual Ordering Cost $240.12 Total Annual Cost $529.59 Maximum Inventory Level 441.32 Average Inventory Level 241.22 Number of Orders per Year 20.01 Cycle Time (Days) 12.49 Expected Stockouts per Year 1.00
Average Payable 365 Average Payable Period Annual Purchase Average Inventory 365 Inventory Holding Period Cogs Average Receivable 365 Receivable Collection Period Annual Sales