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𝑠𝑠
z = σL = (benchmark inventory – mean x leadtime)/ σL
= (1650 -310 x 5)/80
=1.25
L(z)= 0.053
σL L(z)
β=1- 𝑄
80∗0.053
= 1 - 1240
= 99.66%
B) What order quantity and reorder point would minimize the total annual setup, holding and
shortage costs subject to having a fill rate at least equal to 98%?
h= 7 * 0.25 = 1.75
2𝑘λ
Q= EOQ = √ ℎ
= 1458
c) Would the solution in part (b) change if Think Geek has a minimum Type I service level constraint
of 80%? Explain why.
α= 53%
The solution is subject to change since it has a Type 1 level of service of 53% that is >80%
𝜌2 0.8^2
ɭq = = = 3.2 ≈ 3
1− 𝜌 1−0.8
e) The idea observed is that we possess deterministic arrival as well as service times. When the customer
enter at time slot i, they find the system empty.
She leaves the system at, let’s say, i + 1.
Now, the next customer arrives at the time slot i + 2. Hence, at any time we can have a maximum of one
customer in the system and no customer has to wait to be served. Therefore, length of the queue is 0.
Problem 3 – A drive-through car wash