Question: This case highlights how a beverage distributor uses the Fixed Order Interval system to plan replenishment cycles. With a lead time and a fixed 4-week
This case highlights how a beverage distributor uses the Fixed Order Interval system to plan replenishment cycles. With a lead time and a fixed 4-week review schedule, the company evaluates how much demand must be covered in each cycle. By incorporating variability in demand through standard deviation, the case explains the calculation of safety stock to maintain a desired service level of95%. This buffer ensures the company avoids stockouts despite unpredictable demand. The scenario also shows how annual ordering cost is affected by the frequency of reviews. This structured case teaches students how to compute demand during the protection period, design appropriate safety buffers, and calculate total inventory needs when orders are not placed daily.2
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
