A retail store Litely carries a modern white kitchen ceiling lamp that is quite
ID: 3306605 • Letter: A
Question
A retail store Litely carries a modern white kitchen ceiling lamp that is quite popular and they want to achieve a cycle service level of 96%. The order lead time is 6 weeks and the store uses Q system to manage the item. Every time the store orders 1000 units. The anticipated demand during lead-time can be approximated by a Normal distribution curve with a mean of 600 units and a standard deviation of 240 units. The average demand is estimated to be 100 units per week throughout the year. Answer the following questions with regard to this SKU.
How much transportation inventory does the store carry?
What is the total inventory for this item?
Explanation / Answer
Solution:
Average demand during lead time, µ = 600
Std dev of demand during lead time, = 500
Lead time = 6 weeks
Take 1 year = 52 weeks
How much transportation inventory does the store carry?
Annual Demand = (600/6)*52 = 5200
Transportation inventory = 5200*6/52 = 600 units
What is the total inventory for this item?
Total inventory for this item = 600 + 600 = 1200 units
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