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A company sells spare parts for cars and uses a t,S-replenishment policy for a certain product. Replenishment orders are issued every 4 weeks, delivery lead time is 2 weeks. Average weekly demand is normally distributed with mean 5 units and standard deviation 2 units. At the start of a period the physical stock amounts to 12 units. There are not backorders and no outstanding deliveries. The manager issues an order of 23 units.
a) How large is the order-up-to level in this situation?
b) Which fill-rate can be achieved?
c) If the manager wanted to achieve a fill-rate of 98.3%, how many units must he order?
d) Explain the relationship between inventories, service levels and order-up-to level (S).
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