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 14 days, and the lead time is 2 days.

Description

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 14 days, and the lead time is 2 days. The average demand for one item is 40 units per day, and the standard deviation of demand is 3 units per day. Given the on-hand inventory at the reorder time for each order cycle shown in the following table, determine the order quantities for cycles 1, 2, and 3:

Cycle ___________On Hand

1 ????.??…..?. 42

2 ???????..?? 8

3 ?????.??… 103