HP Annual Average Inventory Cost - By Ocean L Lead Time T Review period Exposure period(EP Service Level z Percent Carrying Cost I Unit cost Holding

HP Annual Average Inventory Cost - By Ocean L Lead Time T...

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By Ocean By Air L Lead Time 5.00 weeks Lead Time 1.00 week T Review period 1.00 week Review Period 1.00 week Exposure period (EP) 6.00 weeks EP 2.00 weeks 4.33 weeks/mo Service Level 0.99 z 2.30 Percent Carrying Cost I 40% Unit cost 250.00 Holding Cost 100.00 NOV DEC JAN FEB MAR Monthly Demand 20,572 20,895 19,252 11,052 19,864 Q1: Calculation of Inventory by Ocean Monthly Weekly Demand during EP Mean Std dev Mean Std dev Mean Std dev 15,830.08 5,624.58 3,655.91 2,703.00 21,935.45 6,620.97 Calcuation of Inventory by Air Q2 Monthly Weekly Demand during EP Mean Std dev Mean Std dev Mean Std dev (units) (units) (units) (units) (units) (units) 15,830.08 5,624.58 3,655.91 2,703.00 7,311.82 3,822.62 Annual Transport cost by ship $1.00 per unit $ 189,961 Annual Inventory cost by ship 3,533,572.88 Total Cost 3,723,533.88 The firm should ship product by air as the total inventory and transporation costs are lower.

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