Question

Wegmans sells a basket of assorted chocolate at a selling price of $20. The unit procurement cost for one basket is $8. Weekly demand for this product is normally distributed with a mean of 500 boxes and a standard deviation of 50. The replenishment lead time is a month and the store manager has decided to review the inventory every two weeks. Wegmans incurs $2 to hold an unsold basket over to the next review period. Assume that any excess demand is backordered with the cost of handling each back-order being $10 per unit. (A month=4 weeks)

a) What is the desired service level?

b) What is the optimal base-stock level and safety stock?

c) What is the optimal safety stock if the store manager decides to review the inventory every week?

Answer 1

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