An Auto Parts Store (Operates 350 Days Per Year) in a Major

question 27

Essay

An auto parts store (operates 350 days per year) in a major metropolitan area reviews its inventory on a periodic basis using a computer system. It is experiencing some problems with a tune-up kit. The kit is bought from PRC Tires, a U.S. manufacturer. The annual demand for these kits is 10,500. The cost to carry a kit in the inventory for one year is $4.90, and the cost to place a replenishment order is $17 per order. Replenishment lead time is 4 days. The standard deviation of daily demand is 7 kits.
a.What should be the review period for these tune-up kits?
b.What is the optimal replenishment level without safety stock?
c.What is the optimal replenishment level with safety stock, assuming a 95 percent service level?

---

Definitions:

Worst Outcome

The most negative or least desirable result possible in a given situation.

Self-Disclosure

The act of revealing personal, private information about oneself to others, fostering intimacy and trust in relationships.

Waste Time

The act of using time on activities that are not productive or do not contribute to one's goals.

Gut-Level Communication

A form of interaction that is based on instinctual feelings rather than intellectual analysis.