A drugstore uses fixed-order cycles for many of the items it stocks. The manager
ID: 406754 • Letter: A
Question
A drugstore uses fixed-order cycles for many of the items it stocks. The manager wants a service level of .98. The order interval is 12 days, and lead time is 2 days. Average demand for one item is 66 units per day, and the standard deviation of demand is 4 units per day. Given the on-hand inventory at the reorder time for each order cycle shown in the following table. Use Table.
Determine the order quantities for cycles 1, 2, and 3: (Round your answers to the nearest whole number)
Explanation / Answer
Answer:
Fixed Order Interval
Service level = SL = 0.98
Order interval = OI = 12 days
Lead Time = LT = 2 days
Q = d (OI + LT) + zd OT LT A
= d (14) + 2.05d 12 – A
Cycle1
1120 + 2.05(10) 16 – 41 = 1,163 units
LT = 2 days
Cycle 2
1120 + 2.05(10)
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