Question

A pharmacy replenishes one of its best-selling drugs using a continuous review policy. daily demand for the drug is normally distributed, with a mean of 300 and a standard deviation of 100. the wholesaler can process a replenishment request in 2 days. the current replenishment policy is to order 1,500 units when there are 750 units on hand. what is the cycle service level that the pharmacy achieves with its policy?

Answer 1

Step 1 of 3

Following information is given for this replenishment policy:

Average Daily Demand  = 300

Standard Deviation of Daily Demand  = 100

Average Lead Time for Replenishment  = 2 days

Reorder Point  = 2 days

Reorder Point  = 750

Average Lot Size  = 1,500

Safety inventory is the inventory carried to meet the demand if it exceeds the demand forecasted for that period.

Safety inventory  can be calculated using given formula:

 …… (1)

The total demand during 2 days period is normally distributed with mean  and standard deviation  where,

 …… (2)

 …… (3)