• Information about demand
• Annual demand is 36000 units
• Monthly demand has the standard deviation equal to 800 units
• Information about periodic review system
• Review on-hand inventory and place order accordingly every one month (once a month)
• Delivery lead time is negligible
• Acceptable stockout frequency is twice every three years
• Table of service level and safety factor

Service level

90%

91%

92%

93%

94%

95%

96%

97%

98%

99%

Safety factor

1.28

1.34

1.41

1.48

1.55

1.64

1.75

1.88

2.05

2.33

Discussion 1. The service level and its corresponding safety factor.

• Number of orders in three years is
• Acceptable stockout times in three years
• Service level is
• Safety factor is

Discussion 2. Safety stock and target.

• Length of review period and lead time (in months) is
• Standard deviation (sigma) for demand during review period and lead time is
• Safety stock is
• Expected demand during review period and lead time is
• Target is

Discussion 3. Order quantity

• Suppose at the review time, the on-hand inventory is 2500, the order quantity is