# Texas gladiators apparel store case study

The store purchases the hats from a small manufacturing company in Jamaica. The shipments from Jamaica are erratic, with a lead time of 20 days.

Questions:

1. In the past, Ms. James has placed an order whenever the stock got down to 150 caps. What level of service does this reorder point correspond to?

2. What would the reorder point and safety stock need to be to achieve the desired service level (99%)?

3. Discuss how Jessica James might determine the order size of caps and what additional, if any, information would be needed to determine the order size.

4. Base Case: Suppose that the carrying cost is \$6/unit/year and ordering cost is \$200/order. Assume that there are 52 weeks in a year. For this base case, compute an optimal order quantity, average inventory (when service level is 99%), annual number of orders, total inventory costs, and cycle time.

5. For the base case, construct a graph showing how annual carrying cost, ordering cost, and total cost changes due to the changes in order quantity.

6. Sensitivity Analysis: Construct table(s) and/or graph(s) that show how the optimal order quantity and total inventory costs change when (a) carrying cost varies from \$4 to \$8/unit/year and (b) ordering cost varies from \$150 to \$250/order.

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