Question
Weekly demand for a certain product is normally distributed with a mean of 200 and a standard deviation of 10. The source of supply is
Weekly demand for a certain product is normally distributed with a mean of 200 and a standard deviation of 10. The source of supply is reliable and maintains a constant lead time of 1 week. The cost of placing an order is $10 and the annual holding cost is $3 per unit. Assume 52 weeks per year. Management wants to satisfy a 95% probability of not running out of stock in any one order cycle. 1. What is the average demand during lead-time? 2. What is the standard deviation of demand during lead-time? 3. What should be the safety stock? 4. What should be the reorder point? 5. What should be the order quantity? 6. State the ordering policy by using one sentence.
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