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Inventory management

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A company produces and stocks computer printers in its finished-goods warehouse. These 'demand during lead time' (DDLT) historical data are believed to be representative of future demand for one printer model:

Actual DDLT Frequency Actual DDLT Frequency
0-29 0 70-79 0.25
30-39 0.10 80-89 0.10
40-49 0.10 90-99 0.05
50-59 0.15 100-109 0.05
60-69 0.20 110-120 0

Calculate (a) the order point AND (b) the safety stock for EACH of the following scenarios:

1. If at least a 90% service level is to be provided for these printers.

2. If the DDLT for the printer is actually normally distributed with a mean of 65 and a standard deviation of 10, and a service level of 90% is to be provided for these printers.

3. If the lead time for these printers is so stable that the lead time can be assumed to be a constant 6.5 days, the demand per day is normally distributed with a mean of 10 and a standard deviation of 2, and at least a service level of 90% is to be provided for these printers.

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MS word document contains solution and formula to Calculate (a) the order point AND (b) the safety stock for different scenarios.

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