the harvard co-op orders sweatshirts with the harvard university emblem on them and sells them for $50 each. during a typical month, 900 sweatshirts are sold (this includes all styles and sizes ordered from a particular supplier). it costs $25 to place an order (for multiple sizes and styles) and 25 percent to carry sweatshirts in inventory for a year.
a. How many sweatshirts should the Co-op order at one time in terms of EOQ (round to the nearest integer)?
b. Suppose the supplier would like to deliver sweatshirts once a week. Given that 900 sweatshirts are sold during a typical month, how many sweatshirts does the supplier need to deliver in a week in this context? (A month has 4.33333 weeks)
c. Now you get two lot sizes from parts (a) and (b). Compare (a) to (b), would you agree to the supplier’s proposal of weekly delivery? Why or why not? If you do not agree, what delivery frequency would you suggest?
d. Suppose that sales increase to 1500 sweatshirts per month but you decide to keep the lot size the same as in part (a). How much will this decision cost the Co-op per year (consider total cost that includes holding and ordering)?
e. The Co-op has discovered that it should establish a safety stock for its sweatshirts. It wants to use a reorder point system with a two-week lead time. The demand over a two-week interval has an average of 450 units and a standard deviation for two weeks (that is, s for two weeks) of 250 units. What reorder point should the Co-op establish to ensure a 95 percent service level for each order placed? Using the service level table in the slides for the z-value. Round answer to the nearest integer.
