ISDS question related to reorder point and cycle time, total annual cost.
United Parcel Delivery (UPD) owns a fleet of 1800 delivery trucks serving the metropolitan Chicago area. All trucks are maintained at a central garage. On the average, four trucks a week require a new engine. Engines cost $900 each, and the delivery time is two weeks. There is a fixed order cost of $130, and UPD uses an annual inventory holding cost rate of 30%. For each week a truck is out of service, UPD estimates it suffers a loss of $80. That is in addition to about $1000 they need to allocate for administrative cost to answer customer complaints. a) What is the reorder point? b) What is the optimal inventory level for engine? c) How many spare engins are allowed to be in repair/not ready? d) What is the cycle time e) How many orders per year? f) What is the total annual cost?
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