Question
S&T is a retailer of home goods. They receive inventory from their supplier with a 2-week lead time. Assume they order weekly, and they use
S&T is a retailer of home goods. They receive inventory from their supplier with a 2-week lead time. Assume they order weekly, and they use the order-up-to model for managing inventories. A peppermint soap sells on average one box every 5 weeks. AssumeS&T's demand is Poisson distributed.
d)Suppose due to recent global supply chain disruptions, S&T's supplier increases the lead time to three weeks. Given the additional risks posed by global supply chain disruptions, S&T decides to increase its order-up-to level to 2 boxes. What is their stockout probability?
e)Given the new lead time (i.e., three weeks), suppose S&T wants to minimize inventory while achieving at least a 0.9875 in-stock probability for the peppermint soap. What order-up-to level (in boxes) should they use?
f)Given the new lead time (i.e., three weeks), suppose S&T uses an order-up-to level of 3 boxes. What is the expected on-order inventory?
PLEASE SHOW MATH
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