Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(b) As the manager at a local consumer goods store, Jack wants to evaluate his inventory system and uses his technical knowledge. He currently uses
(b) As the manager at a local consumer goods store, Jack wants to evaluate his inventory system and uses his technical knowledge. He currently uses a fixed-order quantity inventory (Q system) control system and chooses a stock-keeping unit (SKU) with the code #001235 as the first item. The historical demand data for this item shows a lead time of 5 weeks. Demand per week is normally distributed with a mean of 2500 and a standard deviation of 470 per week. The sales manager wants a service level of 97 percent (z = 1.88) during the lead time. i. Calculate the average demand during the lead time for this SKU. (2 marks) ii. Calculate the amount of safety stock that needs to be kept on hand for this SKU. (2 marks) iii. Calculate is the reorder point the should be used for this SKU. Explain the meaning and intuition of it, along with the number you have obtained in the current Q system. (2 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started