Tesla uses a Q-system to make inventory decisions about a replacement part for a Model X. Annual demand has been forecast to be 2,500 units and the business operates 300 days per year. The standard deviation of daily demand has been forecast to be 20 units. The order lead time is 9 days. Tesla pays $8 to hold a unit for a year and $400 to place an order. Tesla’s target service level is 98%.
1. What is the optimal order quantity?
10
700
500
176.78
2. How much safety stock is required to maintain a service level of 98%?
99
107
6
123
3. Which of the following is the closest to Tesla’s annual cycle inventory cost?
4228
4984
4000
5212