A distributor of truck and bus parts has a tie-down strap (B2162H) in inventory. The item has a monthly demand of 169 units with a standard deviation of 327 units per month, making the demand pattern quite lumpy. The lead time for the item is four months with a standard deviation of 0.8 months. The item costs $0.96 each at the factory with a $0,048 transportation charge from supplier to distributor. Carrying costs are 20 percent per year, and order-processing costs are $10 per order. The desired in-stock probability during the lead time is 85 percent. The inventory records are updated daily, and the average daily sales quantity is eight units.
Develop a min-max (reorder point system) inventory control policy for this lumpy-demand item.