- Osprey Sports stocks everything that a musky fisherman could want in the Great North
Woods. A particular musky lure has been very popular with local fishermen as well as
those who buy lures on the Internet from Osprey Sports. The cost to place orders with the
supplier is $30/order; the demand averages 4 lures per day, with a standard deviation of 1
lure; and the inventory holding cost is $1.00/lure/year. The lead time from the supplier is
10 days, with a standard deviation of 3 days. It is important to maintain a 97 percent
cycle-service level to properly balance service with inventory holding costs. Osprey
Sports is open 350 days a year to allow the owners the opportunity to fish for muskies
during the prime season. The owners want to use a continuous review inventory system
for this item.
a. What order quantity should be used?
b. What reorder point should be used?
c. What is the total annual cost for this inventory system?
