Dunstreet\'s Department Store would like to develop an inventory ordering policy

Question

Dunstreet's Department Store would like to develop an inventory ordering policy of a 95 percent probability of not stocking out. To illustrate your recommended procedure, use as an example the ordering policy for white percale sheets.

     Demand for white percale sheets is 5,000 per year. The store is open 365 days per year. Every two weeks (14 days) inventory is counted and a new order is placed. It takes 10 days for the sheets to be delivered. Standard deviation of demand for the sheets is five per day. There are currently 150 sheets on hand.

How many sheets should you order? (Use Excel's NORMSINV() function to find the z value. Do not round intermediate calculations. Round z value to 2 decimal places and final answer to the nearest whole number.)

Number of sheets            

Explanation / Answer

Quantity to be ordered (Q) = d*(OI + LT) + z*SD*sqrt(OI + LT) - A

OI = Order Interval = 14 days

LT = Lead time = 10 days

d = demand = 5000/365 = 13.70 per day

SD = 5 per day

z = For 95% service level, it is equal to 1.64

A = Quantity in hand = 150

Q = 13.70*(14+10) + 1.64*5*sqrt(14+10) - 150 = 219

Ans: 219 sheets

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.