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The inventory management department at a Kroger in Ann Arbor uses a (Q,R) policy to control its stock levels for cereal. For the popular Original
The inventory management department at a Kroger in Ann Arbor uses a (Q,R) policy to control its stock levels for cereal. For the popular Original Cheerios, historical data show that the distribution of weekly demand is approximately Normal, with a mean of 100 and a standard deviation of 7. The replenishment lead time for Original Cheerios is 3 weeks. Each box of cheerios costs $1.75 and each unit of stockout costs $2.25 due to upset customers even though excess demands are backordered. The fixed cost of replenishment per order is $20 and the annual holding cost per unit is $0.50. Assume 52 weeks per year
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