Reference no: EM13578994

Question:

Current weekly demand forecast for an item follows a normal distribution with a mean of 100 units, with a standard deviation of 70 items. It takes one week to receive the order. The company's policy is to provide 95% of the demand from the inventory on hand; they hold a safety stock of 42 units to provide this policy. (Use the approximations for service and backorder levels)

a) Find expected backorder level and the ordering quantity.

b) To preserve the same service level, what order quantity would allow the company to carry no safety stock?

c) Calculate the exact Backorder level

e) Using the exact levels, compare the two strategies' average inventory levels, i.e carrying safety stock vs. not carrying a safety stock.