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Operations management - Inventory control

Charlie's pizza orders all its pepperoni, olives, anchovies, and mozzarella cheese to be shipped directly from Italy. An American distributor stops by every four weeks to take orders. Because the orders are shipped directly from Italy, they take three weeks to arrive. Charlie's Pizza uses an average of 150 pounds of pepperoni each week, with a standard deviation of 30 pounds. Charlieâ's prides itself on offering only the best-quality ingredients and a high level of service, so it wants to ensure a 98 percent probability of not stocking out on pepperoni.
Assume that the sales representative just walked in the door and there are currently 500 pounds of pepperoni in the walk-in cooler. How many pounds of pepperoni would you order?

Solution Preview

This is a periodic order policy as order placement is when sales representative comes to pick up the order every 4 weeks. In periodic order policy the order quantity is equal to the difference between target inventory level ...

Solution Summary

Solution shows formulas and calculations of order qunatity.