Question

Retailer stocks a product for which the daily demand is distributed as follows:



demand value



1



2 3 4 5 6 7 8 9



probability .01 .05



.10



.20 .30 .20 .10 .03 .01



suppose that it costs $25 to hold one unit of this product in inventory for one year, and $6.25 to reorder.



assume that sales occur over 250 days each year and that the lead-time is one day, with no variability.



a. Describe a (q, r) ordering policy that gives a 95% service level.



b. What would be the size of the required safety stock

Answer 1

B) The size of the required saftty stock is large