Question: Management has decided that it will tolerate no more than I Stock-out every 2 years The forecast demand for the particular SKU is 100000 units,

Management has decided that it will tolerate no more than I Stock-out every 2 years The forecast demand for the particular SKU is 100000 units, the company operates for 50 weeks in a year. The product is ordered in quantities of 5000 units. The lead time is 3 weeks. The sales history is given for the past ten weeks as follows. Week Actual demand Deviation Variance 1 2150 2 2250 3 1700 4 2100 5 1800 6 2350 7 2200 8 1600 9 1750 10 2100 Total Mean Variance a. Calculate the ROP for the above policy (6 marks) Show all Calculations b. The management intends to increase the service level to 99%. The cost of carrying inventory is S 5 per year. What the cost of changing the inventory to maintain this level of service. Show all Calculations (4 marks)

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