Question

A company manages its inventory for a specific item using the periodic review inventory model with 10 days between orders. It is currently time to place an order, and the company notes that there are 140 items on hand. The item to be replenished has a lead time of 6 days with a daily demand of 440 units. The standard deviation of demand during the uncertainty period has been calculated to be 65. If the company wants to have at least a 95% service level for this item, what should its order quantity be? E Click the icon to view the table for the z-values for the given probabilities. The order quantity is units. (Enter your response rounded up to the next whole number.) More Info Standard Normal Table Service level z value 0.90 1.28 0.95 1.65 0.98 2.05 0.99 2.33 Enter your answer in the answer box. Print Done

Answer 1

Review period R = 10 days

Lead time L= 6 days

Daily demand d = 440

Standard deviation $\sigma _{d}$ = 65

In hand I = 140

Z = 1.65

Order quantity Q

$Q = d(R+L)+z*\sigma _{d}\sqrt{R+L}-I$

$Q = 440*(10+6)+1.65*65*\sqrt{10+6}-140$

Q = 7329

Order quantity Q = 7329