Tiger Woods's personal venture, Wood and Co, carries Tiger brand handball gloves. The handball glove inventory is maintained using a [Q, r] control system. Woods sells 2000 pairs of gloves (large, unpadded) each year, on the average. The distribution of the yearly demand is approximately Nor- mally distributed with standard deviation σ = 50. It costs roughly $5.00 to place an order to the glove company. Woods uses an inventory carrying charge rate of 0.02 per inventory per month. Handball gloves cost $10.00, and sell for $20.00 per pair. It takes one month from the placement of an order with the glove manufacturer for the order to arrive. If the inventory runs out before the order arrives, Woods figures it costs just $10.00 per unit backordered (There is no good will loss since Woods is one of the world's nicest guys, and nobody can stay mad at him for more than 30 seconds).

(a) Write down the characteristics of the parameters.

(b) Using standard EOQ model, what would be Woods's optimal inventory policy?

(c) What is Woods's optimal inventory policy (i.e., what is [Q* , r *])?

(d) Woods has decided that he has a very bad estimate of the backorder cost. Instead, he prefers to make, on average, quarterly orders on the supplier and to try to meet a target service level during an order cycle of 0.9. Given this, what lot size and reorder point should be used?

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