One item a computer store sells is supplied by a vendor who handles only that item. The demand for that item recently changed, and the store manager must determine when to replenish it. The manager wants a probability of at least 96 percent of not having a stockout during lead time. The manager expects demand to average a dozen units a day and have a standard deviation of two units a day. Lead time is variable, averaging four days with a standard deviation of one day. Assume normality and that seasonality is not a factor.
a. When should the manager reorder to achieve the desired probability?
b. Why might the model not be appropriate if seasonality were present?