Q.4
Leaky Pipe, a local retailer of plumbing supplies use a periodic review inventory control
system for one of its stock items. The review period is 6 weeks and the lead time
for
receiving the material, ordered from its wholesaler is 3 weeks. Weekly demand is normally
distributed with a mean of 100 units and a standard deviation of 20 units.
i)
What is the average demand during the protection interval and the standard deviation
of demand during protection interval?
ii)
What should be the target inventory level if the firm desires 97.5 percent stock out
protection?( z= 1.96 corresponding 97.5 percent stock out protection)
If the 350 units were in the stock at the time of periodic review, how many units should
be ordered?
(6 marks)
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Answer:668 units
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