Ch$\mathrm{.}12$: Inventory$\_.$Management: Reorder Point and Safety Stock$\_$Wheat$\_$Flour$\_$Manufacturing $(5$ pts$)$Ch$.12$: Inventory Management: Fixed Order Interval $-$ Fastenal

Fastenal provides its customers with vendor$-$managed inventory $($VMI$)$ by managing its customers'

fasteners inventory for them.

For one customer, for one part number, Fastenal reviews inventory levels every $14$ days. Average

demand for the part number is $40$ units per day. The lead time to replenish the part number is $2$ days.

The standard deviation of demand is $3$ units per day. The inventory on hand at the end of the first $14$

days is $42.$ The desired service level is $98\%.$

A$).$ What quantity of inventory should be ordered?

Wheat Flour Manufacturing produces flour which is sold to the restaurant industry. It provides you with

the following information:

Demand for wheat flour during lead time averages $250$ pounds;

Demand during lead time is described by a normal distribution that has a mean of $250$ pounds and a

standard deviation of $8$ pounds. Wheat Flour is willing to accept a stockout risk of no more than $5\%.$

Answer the following questions:

a$).$ What value of $z$ is appropriate?

b$).$ How much safety stock should be held?

c$).$ What reorder point should be used?