A cell phone manufacturer is preparing its inventory and production schedule. A key element is installing a SIM card into each phone. Demand has been averaging 210 cards per week. Holding costs are $0.01 per card per week, and reorder costs are estimated at $10 per order.
The manufacturer does not want to be out of stock on more than 1% of their orders. There is a one-day delivery time. The standard deviation of demand is five cards per day. Assume a normal distribution of demand during lead time and a seven-day work week. What is the reorder point?
