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Unformatted text preview: The company has four models, each experiencing a normally distributed daily demand with a standard deviation of 50 units. Currently, the target service level is 98%. The company wants to reduce its inventory holding cost. One option is to redesign its models so that one model meets all demand. Assume that such a redesign is feasible. Also assume that the company uses a periodic review inventory system with lead time 9 days and review time 7 days. To achieve the same service level, Precision Instrument Inc. will hold _____ units of safety inventory for the redesigned model. (z=2.05) (A) 410 (B) 579 (C) 820 (D) 1640 Solution: The standard deviation of demand of the common model is ( 4 )(50) = 100 units. Safety inventory = (2.05)( 9+7 )(100) = 820 units....
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This homework help was uploaded on 03/26/2008 for the course INFO 364 taught by Professor Dontknow during the Spring '08 term at Texas A&M.
- Spring '08