ABC Convenient stores uses fixed-time period model to determine order quantity for their popular chewing gum (Supergum). Daily demand for Supergum is 100 units with a standard deviation of 25 units. The review period is 10 days and lead time is 6 days. At the beginning of this review period there are 50 units in stock.
If 98% service probability is desired, how many units should be ordered?
We compute the number of units of chewing gum a company should manufacture in order to have a 98% chance of being able to satisfy its customers' demands over a given period of time.