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zero stock level to reorder

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An inventory manager for a firm wants to determine the mean demand for a particular product in stock during the reorder lead time(the lag between from the time the products are ordered to the time the order is received). This information is needed to determine how far in advance of a zero stock level to reorder. Both demand and lead time are random variable, defined by the following probability distributions: (please see attached)

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The expert determines how far in advance of a zero stock level to reorder.

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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  • "Your explanation to the answers were very helpful."
  • "What does 1 and 0 means in the repair column?"
  • "Went through all of the formulas, excellent work! This really helped me!"
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  • "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
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