A firm uses a one-week periodic review inventory system. A two-day lead time is needed for any order, and the firm is willing to tolerate an average of one stock-out per year.
a. Using the firm’s service guideline, what is the probability of a stock-out associated with each replenishment decision?
b. What is the replenishment level if demand during the review period plus lead-time period is normally distributed with a mean of 60 units and a standard deviation of 12 units?
c. What is the replenishment level if demand during the review period plus lead-time period is uniformly distributed between 35 and 85 units?