The local Toyota dealer has to decide how many spare shock absorbers of a particular type to order for repairing Toyota automobiles. This shock absorber has a demand of four units per month and costs $25 each. The carrying charge is 30 percent per year, and the ordering cost is $15 per order.
The Toyota dealer is considering installing either a Q or a P system for inventory control. The standard deviation of demand has been 4 units per month, and the replenishment lead time is two months. A 95 percent service level is desired.
a. If a continuous review system is used, what is the value of Q and R that should be used? Round both answers to integer
b. If a periodic review system is used, what is the value of P and T that would be applicable?
Keep decimal points for months and round T to integer
c. What are the pros and cons of using the P system compared with using the Q system for this part?