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A Walmart supplier's demand forecasting team estimates that the demand for jeans is on average 600 pairs per month with a standard deviation of 255
A Walmart supplier's demand forecasting team estimates that the demand for jeans is on average 600 pairs per month with a standard deviation of 255 pairs. They assume that the demand is distributed normally and that jeans form a single demand SKU for Walmart. Walmart demands a 99% service level (i.e., z=2.33). Based on historical data, the supplier estimates that the average lead time is 2 weeks. There is a fixed cost of production of $145 irrespective of the order size. Each pair has a variable cost of $5 and monthly cost of capital at a 1.5% rate and handling costs amounting to $1 per pair per month. Assume 4 weeks per month
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